LIBRARY 

OF  THE 

University  of  California. 


^ 

V 


GIFT    OF 


"7^:. 


Depreciated  Currency 
and 

Diminished   Railway  Rates 


AN   INQUIRY 


CONDUCTED  BY  THE  RAILWAY  WORLD  FOR  THE  PURPOSE  OF 

ASCERTAINING  THE  OPINIONS  OF  LEADING  ECONOMISTS 

AND  PUBLICISTS  CONCERNING  THE  PROPRIETY  OF 

AN  ADJUSTMENT  OF  RAILWAY  RATES  TO  THE 

DIMINISHED  VALUE  OF  THE   MONEY  IN 

WHICH  THEY  ARE  PAID. 


RAILWAY  WORLD 
WiTHERSPooN  Building 

PHILADELPHIA 


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Digitized  by  the  Internet  Archive 

in  2007  with  funding  from 

Microsoft  Corporation 


http://www.archive.org/details/depreciatedcurreOOwardrich 


Depreciated  Currency 

and 

Diminished   Railway   Rates 


AN   INQUIRY 


CONDUCTED  BY  THE  RAILWAY  WORLD  FOR  THE  PURPOSE  OF 

ASCERTAINING  THE  OPINIONS  OF  LEADING  ECONOMISTS 

AND  PUBLICISTS  CONCERNING  THE  PROPRIETY  OF 

AN  ADJUSTMENT  OF  RAILWAY  RATES  TO  THE 

DIMINISHED  VALUE  OF  THE   MONEY  IN 

WHICH  TPIEY  ARE  PAID* 


OF    TUP 


UNIVERSITY 

OF 


RAILWAY  WORLD 

WiTHERSPOoN  Building 

PHILADELPHIA 


"f-o  7 


CONTENTS 


Wliy  this  inquiry  was  undertaken   5 

Text  of  the  circular  of  inquiry    7 

*List  of  those  whose  answers  are  published   13 

Answers  to  the  first  question 17 

Answers  to  the  second  question  2>^ 

Answers  to  the  third  question 54 

Answers  to  the  fourth  question 64 

Answers  to  the  fifth  question 77 

Answers  to  the  sixth  question 89 

Answers  to  the  seventh  question  ; 103 

Analysis  of  answers,  by  the  Editor  of  the  Railway  World  .  ..122 

*The  concluding  question  on  the  circular  of  inquiry  was  "May 
we  publish  your  reply?"  This  pamphlet  includes  every  reply  in 
which  this  question  was  not  ansv/ered  in  the  negative  and  every 
reply  published  is  given  in  full  and  without  revision. 


V 


WHY   THIS  INQUIRY   WAS   UNDERTAKEN. 

During  the  summer  of  1908  the  daily  press  gave  cur- 
rency to  rumors  that  the  railways  of  the  United  States 
were  considering  a  general  revision  of  their  schedules  of 
freight  rates  with  a  view  to  obtaining  increased  revenue. 
Accompanying  these  reports  were  statements  that  the  aug- 
mented cost  of  conducting  the  business  of  supplying  rail- 
way transportation  had  made  increased  revenue  abso- 
lutely necessary  if  wages  were  to  be  maintained  at  the 
existing  level  and  interest  obligations  met.  It  was  alleged 
that  railway  labor  was  costing  vastly  more  than  formerly, 
that  locomotives,  cars,  rails,  fuel,  supplies  and  materials 
of  all  kinds,  had  increased  greatly  in  cost  and  that  while 
these  changes  had  been  in  progress  railway  rates  had  re- 
mained substantially  stationary  or  had,  upon  the  average, 
declined. 

The  meaning  of  these  statements,  if  they  could  be  ac- 
cepted as  accurate,  was  clearly  that  there  had  been  a  ma- 
terial decline  in  the  value  of  the  money  received  by  the 
railways  which,  not  having  been  offset  by  a  corresponding 
increase  in  the  sums  received  for  particular  services, 
amounted  to  a  genuine  decline  in  railway  rates.  Further, 
it  was  plain,  that  if  such  a  decline  had  taken  place  and  had 
proceeded  so  far  as  to  endanger  the  current  wages  of  rail- 
way employees  or  to  render  doubtful  the  ability  to  earn  in- 
terest on  bonds  or  a  fair  return  to  investors,  the  employees 
of  the  railways  and  owners  of  railway  property  were 
justly  entitled  to  such  nominal  increases  in  rates  as  would, 
in  part  at  least,  offset  the  real  reductions.  Such  advances 
would  be  "nominal,''  only,  for  though  having  the  form 
and  appearance  of  advances  they  would  in  reality  consti- 
tute nothing  more  than  a  partial  readjustment  in  view  of 


the  changed  value  of  standard  money.  They  would  but 
partially  restore  the  old  and  accepted  relation  between 
railway  charges  and  wages  and  prices. 

Manifestly  the  real  question,  the  only  open  question, 
was  whether  the  suggestions  made  in  behalf  of  the  pro- 
posed revision  were  correct  statements  of  actual  facts  of 
current  industrial  life.  This  question  the  Railway 
World  determined  to  submit  to  the  leading  economists 
and  pubHcists  of  the  United  States  and  to  that  end  a  series 
of  questions  were  carefully  formulated  and  a  circular  em- 
bracing them,  together  with  some  explanation  of  the  pur- 
pose in  view,  was  sent  to  each  member  upon  the  last  pub- 
lished list  of  the  American  Economic  Association.  The 
entire  number  of  circulars  of  inquiry  sent  out  was  i,oo6 
and  103  replies  were  received  of  which  yj  included  per- 
mission to  publish.  The  quality  of  most  of  the  replies 
submitted  by  those  who  gave  the  desired  permission  as  to 
publication  as  well  as  the  high  authority  of  those  by 
whom  they  were  prepared  has  made  their  publication,  in 
full,  seem  desirable.  The  very  few  in  the  following  pages 
which  fall  obviously  below  the  general  level  of  excellence 
are  included  with  the  others  in  order  to  avoid  the  neces- 
sity of  setting  up  any  standard  of  selection. 

In  submitting  this  pamphlet  the  Railway  World 
wishes  to  express  its  especial  gratitude  to  each  of  those 
whose  attention  to  its  circular  and  generous  permission 
to  publish  have  made  it  possible.  The  editors  are  also  in- 
debted to  many  whose  replies  cannot  be  included,  because 
such  permission  was  withheld,  for  courteous  and  valuable 
suggestions.  Thanks  are  also  expressed  for  a  number  of 
letters  containing  much  of  value  and  interest  which,  how- 
ever, not  being  addressed  directly  to  any  of  the  inquiries 
of  the  circular,  would  not  sufficiently  illuminate  the  in- 
quiry t©  warrant  the  expansion  of  this  publication  that 
their  inclusion  would  entail. 


TEXT   OF    THE   CIRCULAR   OF   INQUIRY. 

The  circular  of  inquiry  was  dated  at  Philadelphia, 
Pennsylvania,  as  of  September  14,  1908,  and  signed  by 
the  Railway  World.  The  full  text  of  this  circular  was 
as  follows : 

Your  attention  to  the  inquiry  herewith  propounded  and  the 
courtesy  of  as  prompt  and  complete  a  response  as  your  conven- 
ience will  permit  is  respectfully  solicited. 

The  inquiry  is  a  serious  one,  intended  to  serve  a  serious  pur- 
pose, viz.,  that  of  aiding  to  determine  the  policy  of  this  news- 
paper upon  a  matter  of  grave  importance  and  of  supplying  ma- 
terial and  guidance  for  its  public  discussion. 

If  we  are  favored  with  a  response,  no  portion  thereof  will  be 
made  public  without  your  consent,  but  we  should  be  especially 
pleased  to  receive  such  consent. 

A  letter  identical  with  this  is  being  addressed  to  each  of  a 
large  number  of  economists  and  publicists,  for  it  is  believed  that 
the  nature  of  the  problem  is  such  that  the  views  of  trained  ob- 
servers of  industrial  phenomena  are  particularly  certain  to  in- 
fluence the  formation  of  a  wise  public  sentiment 

The  Problem. 

The  statement  has  been  made  that,  on  account  of  recent  rapid 
augmentation  of  the  world's  gold  supply,*  or  from  other  causes, 
gold  has  depreciated  in  value  and  hence  the  standard  dollar  of  the 
United  States  is  now  of  less  value,  i.  e.,  has  smaller  purchasing 
power,  than  formerly,  (say)  from  1890  to  1899.  Further,  it  has 
been  stated,  that  as  a  consequence  of  this  fall  in  the  value  of 
the  dollar,  those  wages,  prices  and  rates  w^hich  have  not  been 
adjusted  to  the  changed  value  of  the  standard  by  fully  compen- 
satory changes  in  their  relation  to  the  unit  of  value  are  really 
lower  than  formerly,  although  it  may  happen  that  they  are  now 
expressed,  in  terms  of  that  unit,  by  somewhat  higher  figures. 


*The  annual  report  of  the  Bureau  of  the  Mint  for  the  year 
igo6  gives  estimates  of  the  world's  yearly  production  of  gold  (see 
page  36)  from  w'hich  the  following  figures  for  each  quinquennial 
period  from  1862—66  to  1902-06  have  been  obtained : 

Years.  Fine  ounces.  Value. 

1902-1906  84,646,918  $1,749,807,300 

1897- 1901  65,076,311  1,345,246,700 

1892-1896  42,876,543  886,337,100 

1887-1891  28,490,926  588,959,700 

1882-1886  24,851,094  513,717,700 

1877-1881  26,668,106  551,278,700 

1872-1876  24,367,771  503,727,000 

1867-1871  30,671,358  634,033,000 

1862-1866  30,068,414  621,570,000 


Especially  as  to  railway  rates,  it  is  urged  by  some,  that  they 
have  not,  since  (say)  1897,  been  adjusted  to  this  depreciation  of 
the  standard  money  in  which  they  are  expressed  and  paid  and 
that,  in  spite  of  attempts  here  and  there  at  such  an  adjustment, 
the  generally  lower  purchasing  power  of  the  sums  received  for 
railway  services  is  equivalent  to  a  very  substantial  reduction  in 
the  charges  for  all,  or  nearly  all,  of  the  services  rendered. 

Authorities  for  this  View. 

The  following  concise  statement  has  been  made  by  President  A. 
T.  Hadley,  of  Yale  University : 

"It  seems  also  clear  that  the  average  increase  in  rates  is 
apparent  only  and  not  real.  If  the  price  of  goods  carried 
and  wages  of  railroad  laborers  and  the  cost  of  materials  of 
railroad  construction  and  operation  have  increased  from  ten 
to  forty  per  cent.,  an  increase  of  apparent  charge  of  five  per 
cent.^  on  the  part  of  the  railroads  is  virtually  a  tremendous  and 
gratifying  decrease." — President  Hadley  in  Boston  Tran- 
script of  April  I,  1905. 

In  the  admirable  essay,  which  received  the  first  prize  in  the 
Hart,^  Schaffner  and  Marx  contest  in  the  year  1906,  Dr.  Albert  N. 
Mterritt  expressed  the  same  view  in  greater  detail,  saying,  in 
part  : 

"At  the  same  time,  coupled  with  the  general  prosperity 
which  has  attended  the  increased  amount  of  business  done  has 
come  a  considerable  rise  in  the  prices  of  nearly  all  commodi- 
ties, while  there  has  occurred  also  a  considerable  advance  in 
the  rate  of  wages.  For  these  reasons  the  cost  of  operation 
upon  our  railroads  has  been  greatly  increased. 

"Whatever  the  cause,  the  fact  of  this  rise  in  the  price  of 
services  and  commodities  is  incontestable.  In  other  words,  a 
smaller  quantity  of  labor  and  materials  can  be  purchased 
with  a  given  amount  of  gold  coin  to-day  than  could  be  pur- 
chased six  years  ago. 

"But  a  general  advance  in  the  prices  of  commodities  ac- 
cording to  another  way  of  stating  the  same  fact,  is  only  a 
relative  decline  in  the  value  of  that  standard  in  which  prices 
are  measured.  When  measured  in  the  amount  of  commodi- 
ties and  services  which  it  will  buy,  gold  has  therefore  de- 
clined about  25  per  cent,  in  value  since  the  period  of  1895- 
1899.  Would  it  then  be  unreasonable  to  expect  that  gold, 
being  less  valuable  for  the  purchase  of  commodities  and  labor, 
should  also  be  less  valuable  in  the  purchase  of  transporta- 
tion? What  are  the  facts?  If  we  take  similar  periods  for 
the  computation  of  average  railway  rates,  we  find  that  there 
has  been  no  advance  whatever,  the  average  rate  for  the  first 
period,  1895-1899,  being  7.84  mills  per  ton-mile,  while  that  of 
1904  was  only  7.80  mills  per  ton-mile.    Thus  while  average 

8 


prices  have  advanced  25  per  cent,  there  has  actually  been  a 
slight  decline  in  average  railway  rates. 

"An  important  distinction  is  here  to  be  indicated  which  is 
not  often  recognized.  There  are  two  sorts  of  rates,  which 
may  be  designated  respectively  as  nominal  and  real.  Nomi- 
nal rates  are  measured  in  money,*  while  real  rates  consist  of 
a  percentage  of  the  value  of  the  commodities  transported. 
To  determine  the  real  rate,  that  proportion  of  the  value  of 
the  goods  transported,  which  must  be  given  for  the  services 
of  transportation,  must  be  ascertained. 

"This  distinction  may  at  first  seem  useless,  and  the  method 
of  computing  real  rates  certainly  refuses  to  lend  itself  to  ex- 
act statistical  analysis.  Nevertheless,  real  rates,  such  as  de- 
scribed are  the  only  proper  measure  of  the  relative  burden 
of  the  transportation  charges  upon  the  industries  of  our  coun- 
try. Obviously  it  is  of  little  concern  to  the  producer  just 
what  may  be  his  absolute  money  income  and  expenditure. 
That  which  is  of  especial  interest  to  him  is  his  relative  in- 
come and  his  outlay.  It  is,  therefore  the  proportion  of  the 
value  of  his  wheat  which  must  be  paid  for  its  transporta- 
tion that  determines  the  real  burden  of  the  transportation 
charge  upon  him.  On  the  other  hand  it  is  the  amount  of 
labor  and  materials  which  the  money  received  for  transpor- 
tation will  buy  which  is  of  interest  to  the  railroad  in  deter- 
mining whether  or  not  it  can  derive  a  profit  from  the  rates 
charged.  If  now  real  rates  are  accepted  as  the  proper  basis 
for  determining  the  course  of  rates  in  this  country  the  whole 
situation   assumes    an    entirely    different    aspect.    ...     In 

"^Mt.  H.  T.  Newcomb  has  urged  this  distinction  in  numerous 
articles.  _  The  following  was  published  on  January  i,  1904.  (See 
The  Railway  Age  of  that  date)  :  "Raihvay  charges,  like  wages 
and  the  prices  of  commodities,  are  measured  in  money  and  paid 
in  money.  The  wage-earner,  however,  cannot  eat  money  nor 
wear  it  nor  shelter  himself  beneath  it.  He  values  it  for  what 
it  will  buy,  and  his  wages  are  worth  to  him  precisely  what  they 
will  buy,  no  more  and  no  less.  If  at  one  time  he  earns  two 
dollars  per  day  he  is  as  well  off  as  on  four  dollars  per  day  with 
prices  all  doubled.  It  is  the  same  with  the  seller  of  goods.  If 
what  he  has  to  pay  for  rents,  fuel,  clothing  household  ex- 
penses and  amusements  double  he  is  no  better  off  because 
he  gets  one-fourth  more  for  each  article  he  sells.  It  is  precisely 
the  same  with  the  railway,  with  its  employees  and  with  the  hold- 
ers of  its  securities.  If  the  wages  of  railway  employees,  the 
cost  of  fuel,  rails,  ties,  rolling  stock,  etc.,  have  advanced,  the  rail- 
ways are  better  or  worse  off  in  proportion  as  the  increase  in 
money  (nominal)  rates  has  exceeded  or  fallen  short  of  the  en- 
hanced cost  of  services  and  supplies.  Everyone  knows  that 
wages  and  prices  have  largely  increased  during  recent  years. 
Nearly  everyone  knows  that  they  have,  in  most  cases,  gone  up- 
ward faster  and  further  than  railway  rates." — The  Work  of  the 
Interstate  Commerce  Commission,  Gibson  Brothers,  Washington, 
D.  C,  1905.    See  also  Railway  Age  of  August  12,  1904. 


other  words,  real  rates  have  declined  25  per  cent  in  less  than 
ten  years/'t 

Wages  Statistics. 

The  annual  reports  of  Statistics  of  Railways  in  the  United 
States  compiled  by  the  Interstate  Commerce  Commission,  under 
the  direction  of  Prof.  Henry  C.  Adams,  head  of  the  Department  of 
Political  Economy  in  the  University  of  Michigan,  and  Statisti- 
cian to  the  Commission,  indicate  the  extent  of  the  depreciation 
of  the  unit  of  value  in  relation  to  the  wages  of  railway  labor. 
The  following  figures  are  from  the  reports  for  1897  and  1907 : 


Class  of  employees.  1897. 

Station    agents    $1.73 

Other  station  men   1.62 

Enginemen     3.65 

Firemen    2.05 

Conductors    3.07 

Other  trainmen    1.90 

Machinists    2.23 

Carpenters   2.01 

Other   shopmen    1. 71 

Section   foreman    1.70 

Other    trackmen    1.16 

Switchmen,  flagmen,  watchmen   1.72 

Telegraph  operators  and  despatchers  .  1.90 

Employees,  account  floating  equipment  1.86 

All  other  employees  and  laborers   ...  1.64 

Statistics  of  Prices. 

Bulletin  No.  75,  of  the  United  States  Bureau  of  Labor,  shows 
average  prices  for  the  following  articles  used  by  railways,  or,  as 

raw  materials,  for  the  manufacture  of  railway  supplies : 

Articles.                                 Unit.  1897.              1907.        Percent. 

Increase. 

Coal,   anthracite,   broken    Ton          $  3.25              $  4.20              29.23 

Coal,  bituminous,  Georges  Creek     Ton  .83                  1.54              85.54 

Axes,    M.    C.    O.    Yankee    Each  .39                     .68               74.36 

Coke,    Connellsville,    furnace Ton  1.62                  2.83              74.69 

Bar  iron,  best  refined  from  mill  Pound  .011                   .0175          59.09 

Barbed    wire,    galvanized     Cwt.  1.80                  2.63              46.11 

Copper   wire,    bare    Pound  .1375                .2402          74.69 

Doorknobs,     steel,  bronze,  plated.. Pair  .166                   .450          171.08 

Files,    8-inch    Dozen  .81                  1.00              23.46 

Hammers,   Magdole  No.   V/z Each  .3a                    -47              23.68 

Lead   pipe    Cwt.  4.32                  6.71              55.32 

Locks,   common,  mortise    Each  .0833                .20           140.10 


Per  cent 

1907. 

mcrease. 

$2.05 

18.50 

1.78 

0.88 

4.30- 

17.81 

2.54 

23.90 

3.6Q 

20.20 

2.54 

33.68 

2.87 

28.70 

2.40 

19.40 

2.06 

20.47 

1.90 

11.76 

1.46 

25.86 

1.87 

8.72 

2.26 

18.95 

2.27 

22.04 

1.92 

17.07 

fAlbert  N.  Merritt,  Federal  Regulation  of  Railway  Rates, 
Houghton,  Mifflin  and  Company,  Boston  and  New  York,  1907, 
pp.  7-10. 

10 


Nails,    cut,    8-penny,     fence    and 

common     Cwt.  1.33  2.16  62.41 

Nails,   wire,   8-penny,    fence   and 

common     Cwt. 

Pig   iron,    Bessemer    Ton 

Pig  iron,   foundry  No.   1 Ton 

Pig  iron,   foundry   No.   2 Ton 

Pig   iron,    gray   forge,    southern, 

coke     Ton 

Steel    billets     Ton 

Steel   rails    Ton 

Steel   sheets,   black  No.   27 Pound 

Tin,    pig    Pound 

Tin,  plates,   domestic,   Bessemer, 

coke     Cwt. 

Zinc,    sheet    Cwt. 

Brick,    common,    domestic    M 

Cement,    Rosendale    Bble. 

Doors,    pine    Each 

Lumber,    hemlock    M  feet 

Lime,    common    Bbl. 

Linseed    oil,    raw    Gal. 

Lumber,   maple,   haro    M  ieet 

Lumber,    oak,    white,    plain M  feet 

Lumber,   oak,  white,  quartered .  .  M  feet 

Lumber,   pine,   yellow    M  feet 

Lumber,    poplar     M  feet 

Shingles,    cypress     M 

Lumber,    spruce     M  feet 

Window  glass,  American,  single, 

firsts,    6    by    8     to    10    by 

15    inch     50  sq.  ft.      2.20  2.81  27.73 

Window  glass,  American,   single, 

thirds,    6    by    8    to    10    bv 

15    inch     50  sq.  ft.      1.96  2.24  14.29 

The  bulletin  indicates  that  putty,  Portland  cement  and  Ames 
shovels  are  the  only  exceptions  to  the  general  rule  of  greatly  in- 
creased prices  of  railway  supplies. 

The  same  official  bulletin  gives  the  following  index  numbers 
for  "all  commodities"  showing  the  relation  of  average  prices  for 
each  year  to  the  average  for  the  ten  years  from  1890  to  1899,  in- 
clusive, thus  indicating  the  real  measure  of  the  decline  in  the 
value  of  the  dollar : 


1.49 

2.12 

42.28 

10.13 

22.84 

125.47 

12.10 

23.90 

97.52 

10.10 

23.87 

136.34 

8.80 

20.99 

138.52 

15.08 

29.25 

93.97 

18.75 

28,00 

49.33 

0.019 

0.025 

31.58 

.1358 

.3875 

185.35 

3.18 

4.09 

28.62 

4.94 

7.49 

51.62 

4.94 

6.16 

24.70 

.75 

.95 

26.67 

.81 

1.88 

132.10 

11.00 

22.25 

102.27 

.72 

.95 

31.94 

.33 

.43 

30.30 

26.50 

32.25 

21.70 

36.25 

55.21 

52.30 

53.83 

80.00 

48.62 

16.44 

30.50 

85.52 

30.67 

58.08 

89.37 

2.35 

4.23 

80.00 

14.00 

24.00 

71.43 

Index 

Index 

fears. 

numbers. 

Years. 

numbers. 

1897 

89.7 

1903 

1 13.6 

1898 

93.4 

1904 

113.0 

1899 

101.7 

1905 

1 15.9 

1900 

1 10.5 

1906 

122.5 

1901 

108.5 

1907 

129.5 

1902 

112.9 

,  W'e  have  thus  fully  stated  the  problem  and  repeated  arguments 
and  information  with  which  you  are,  of  course,  fully  conversant, 
in  order  that  you  may  not  fail  to  have  before  you  sufficient  facts 
to  make  our  queries  particularly  clear.  May  we  now  ask  your 
attention  to  the  following  specific  inquiries? 

II 


Our  Questions. 

1.  Are  there,  in  fact  and  in  actual  practice,  such  distinctions 
between  (a)  nominal  wages  and  real  wages;  (b)  nominal  prices 
and  real  prices,  and  (c)  nominal  railway  rates  and  real  rail  way- 
rates  as  the  foregoing  quotations  suggest? 

2.  If  there  is  such  a  distinction  between  nominal  and  real  rail- 
way rates,  is  it  important,  and  what  is  the  extent  of  its  import- 
ance? 

3.  Has  the  American  dollar  depreciated  since  1897 

4.  If  the  American  dollar  has  depreciated  since  1897,  ap- 
proximately what  percentage  of  its  value  in  that  year  has  it  lost? 

5.  Wihat  effect  has  this  depreciation  of  the  American  dollar(  if 
it  has  depreciated)  produced  as  to  wages  or  prices  which  have 
not  been  fully  adjusted  to  the  diminished  value  of  the  standard? 

6.  Were  the  freight  rates  charged  by  the  railways  of  the 
United  States  in  the  year  1897,  in  your  opinion,  generally  too 
high? 

7.  Assuming  that  $1.35  will  pay  for  only  as  much  labor  or  rail- 
way employees  and  as  much  railway  equipment,  fuel  and  other 
materials  as  $1.00  would  buy  in  1897  and  that  nominal  railway 
rates  had  been  so  adjusted  that  it  required  $1.10  to  pay  for  rail- 
way service  that  $1.00  paid  for  in  1897,  would  the  comparison  be- 
tween real  railway  rates  at  the  different  times  show  an  advance 
or  a  reduction? 

8.  Mav  we  publish  your  reply? 

We  repeat  these  questions  upon  a  separate  sheet,  enclosed  here- 
with, and  also  have  pleasure  in  enclosing  a  stamped  and  addressed 
envelope  for  your  reply. 

Trusting  that  you  will  favor  us  with  your  views  upon  these 
questions,  and  any  pertinent  suggestions  which  you  may  wish  to 
make,  and  assuring  you  in  advance  of  our  appreciation  of  your 
assistance,  we  remain. 


12 


List  of  Those  Whose  Answers  are  Published. 

PAGES. 

Adams,  T.  S.,  Associate  Professor  of  Political  Economy, 
University  of  Wisconsin,  Madison,  Wisconsin 

17,  36,  54,  65,  Tj,  89,  103 
Agger,  Eugene  E.,  Columbia  University,  New  York  City, 

17,  36,  54,  65,  n,  89,  103 
Allen,  W.  F.,  Editor,  Official  Railway  Guide,  New  York  City 

18,  36,  54,  65,  89,  103 
Andrews,  E.  Benjamin,  Former  Chancellor,  University  of 
Nebraska,  Lincoln,  Nebraska 18,  zii  54,  65,  'JT,  89,  103 

Arbuthnot,  C.   C,  Western  Reserve  University,  Cleveland, 

Ohio   18,  37,  54,  65,  ^^,  89,  103 

Bacon,  N.  T.,  Peace  Dale,  Rhode  Island,  18,  y?^  54,  65,  ^T,  90,  104 

Balch,  Emily  Green,  Associate  Professor  of  Economics  and 
Sociology,  Wellesley  College,  Wellesley,  Massachusetts  . .  104 

BiLGRAM,  Hugo,  Machinist,  1235  Spring  Garden  Street,  Phila- 
delphia, Pennsylvania  19,  37,  54,  'j'j 

Blood,  John  Balch,  id  Post  Office  Square,  Boston,  Massa- 
chusetts  19,  zi^  55,  66,  78,  90,  104 

Boyle,  James  E.,  State  University  of  North  Dakota,  Grand 
Forks,  North  Dakota 19,  38,  55,  66,  78,  90,  104 

Brindley,  John  E.,  Assistant  Professor  of  Political  Economy, 
Iowa  State  College,  Ames,  Iowa 19,  38,  55,  90,  104 

Bullock,  Charles  J.,  Professor  of  Economics,  Harvard  Uni- 
versity, Cambridge,  Massachusetts  .  .19,  38,  56,  66,  78,  91,  105 

Clark,  Victor  S.,  Collaborator  in  charge  division  of  manu- 
factures, economic  history,  Carnegie  Institution,  Wash- 
ington, D.  C 19,  38,  56,  66,  78,  91,  105 

Clow,  F.  R.,  Oshkosh,  Wisconsin  19,  39,  56,  ^d,  79,  91,  105 

CoHN,  Morris  M.,  Director,  Little  Rock  Board  of  Trade,  Lit- 
tle Rock,  Arkansas  21,  39,  56,  91 

Crook,  J.  W.,  Professor  of  Economics,  Amherst  College,  Am- 
herst, Massachusetts  20,  38,  56,  66,  "j^,  91,  io5 

Crowell,  John  Franklin,  Editor,  Wall  Street  Journal,  New 

York  City   19,  39,  9i,   I05 

Crum,  F.  S.,  Prudential  Insurance  Company,  Newark,  New 
Jersey 21,  39,  56,  (£,  79,  9i,  I05 

13 


CuMMiNGS,  John,  University  of  Chicago,  Chicago,  Illinois  . 

21,  40,  57,  66,79,  92,  105 

Daniels,  W.  M.,  Professor  of  Political  Economy,  Princeton 

University,  Princeton,  N.  J 21,  40,  51,  67,  92,  106 

Davenport,  H.  T.,  Columbia,  Missouri 22,  57,  (ff,  79,  92,  106 

Dewey,  Davis  R.,  Professor  Economics  and  Statistics,  Mas- 
sachusetts Institute  of  Technology,  Boston,  Massachu- 
setts     22,  57,  dj,  79,  92 

DoTEN,  Carroll  W.,  Boston,  Massachusetts 

22,  40,  57,  ^1.  79,  92,  107 

Droppers,  Garrett,  Lecturer  on  Political  Economy,  Univer- 
sity of  Chicago,  Chicago,  Illinois  22,  40,  57,  79,  93,  108 

Emerick,  C.  F.,  12  Massasirt  Street,  Northampton,  Massa- 
chusetts   23,  41,  57,  67,  80,  93,  108 

Fairchild,  a.  B.,  Crete,  Nebraska 23,  41,  57,  67,  80,  93 

Fairchild,  Fred  R.,  Yale  University,  New  Haven,  Connec- 
ticut   23,  41,  58,  67,  80,  93,  109 

Fisher,  Irving,  Professor  Political  Economy,  Yale  Univer- 
sity, New  Haven,  Connecticut 23,  42,  58,  68,  80,  93,  109 

Fisher,  Willard  C,  Wesleyan  University,  Middletown,  Con- 
necticut   24,  42,  58,  68,  109 

Forrest,  J.  D.,  Professor  of  Sociology  and  Economics,  But- 
ler College,  Indianapolis,  Indiana 24,  42,  58,  (:^,  80,  94,  no 

Fradenburgh,  a.  G.,  Adelphi  College,  Brooklyn,  New  York. 

24,  42,  58,  68,  94,  no 

Garrison,  George  P.,  Professor  of  History,  University  of 
Texas,  Austin,  Texas 24,  42,  58,  68,  80,  94,  no 

Green,  David  L,  Superintendent,  Charity  Organization  So- 
ciety of  Hartford,  Hartford,  Connecticut,  24,  43,  58,  80,  94,  no 

Haney,  Lewis  H.,  Assistant  Professor  of  Economics,  Univer- 
sity of  Iowa,  Iowa  City,  Iowa 24,  43,  58,  80,  94,  no 

Hart,  W.  O.,  Lawyer,  134  Carondelet  Street,  New  Orleans, 

Louisiana  24,  43,  58,  69,  81,  94,  no 

Hess,  R.  H.,  419  Stirling  Court,  Madison,  Wisconsin 

25,  43,  58,  69,  81,  94,  no 

Johnson,  Joseph  French,  Professor  of  Political  Economy, 

New  York  University,  New  York  City,  25,  44,  58,  69,  81,  94,  no 

Kemmerer,  E.  W.,  Assistant  Professor  of  Political  Econ- 
omy, Cornell  University,  Ithaca,  New  York 

25,  44,  59,  69,  81,  95,  III 
KiNLEY,  David,  University  of  Illinois,  Urbana,  Illinois 

25,  44,  59,  82,  95,  III 

KuRSHEEDT,  M.  A.,  302  Broadway,  Manhattan,  New  York  City 

25,  44,  59,  69,  82,  95,  112 
14 


Leeds,   Charles   H.,  50  Suburban  Avenue,   Stamford,  Con- 
necticut  26,  45,  59,  70,  82,  95,  112 

Lough,  W.  H.,  Jr.,  Secretary,  New  York  University  School 
of  Commerce,  Accounts  and  Finance,  New  York  City 

25,  59,  82,  95,  112 

Lyman,  Arthur  T.,  Post  Office  Box  1717,  Boston,  Massa- 
chusetts    26,  45,  59,  95 

McCrea,  Roswell  C,  Associate  Director,  New  York  School 

of  Philanthropy,  New  York  City 26,  45,  60,  70,  82,  96,  112 

Martin,  John,  Grymes  Hill,  Stapleton,  New  York 

26,  45,  60,  70,  82,  96,  112 

Meeker,  Royal,  Assistant  Professor  of  Economics,  Prince- 
ton University,  Princeton,  New  Jersey  26,  45,  60,  70,  S3,  96,  113 

MiXTER,  Charles  W.,  Political  Economist,  59  Buell  Street, 
Burlington,  Vermont  26,  45,  60,  70,  83,  96,  113 

MoRMAN,  James  B.,  United  States  Department  of  Agricul- 
ture, Washington,  D.  C 26,  46,  69,  83,  96,  114 

Moynahan,  George  S.,  ioi  Milk  Street,  Boston,  Massachu- 
chusetts  26,  46,  60,  70,  83,  96,  114 

Parish,  L.  W.,  Department  of  Economics,  Iowa  State  Nor- 
mal School,  Cedar  Falls,  Iowa 29,  47,  61,  71,  84,  98,  115 

Newcomb,  H.  T.,  Lawyer,  Metropolitan   Bank    Building,    Wash- 
ington, D.  C 28,  47,  61,  70,  84,  97,  114 

Parmalee,  Julius  H.,   1448  Rhode  Island  Avenue,   Wash- 
ington, D.  C 29,  48,  61,  71,  84,  98,  115 

Persons,  Warren  M.,  Hanover,  New  Hampshire 

29,  48,  61,  71,  84,  98,  115 

Plehn,  Carl  C,  Dean,  College  of  Commerce,  University  of 

California,  Berkeley,  California 29,  48,  61,  71,  85,  98,  116 

Pope,  Jesse  E.,  Former  Professor  of  Economics,  University 
of  Missouri,  Columbia,  Missouri  ...29,  48,  61,  71,  85,  98,  116 

Powers,  H.  H.,  President,  Bureau  of  Universal  Travel,  Bos- 
ton, Massachusetts 30,  49,  61,  71,  85,  98,  116 

Powers,  L.    G.,   Chief    Statistician,   Bureau   of  the   Census, 
Washington,  D.  C 30,  49,  61,  71,  85,  98,  116 

PuRDY,    Lawson,    Department    of    Taxes    and    Assessments, 
New  York  City 30,  49,  61,  72,  85,  99,  1 16 

QuAiNTANCE,  H.  W.,  Laramie,  Wyoming, 30,  49,  61,  99,  116 

Raper,  Charles  Lee,  Professor  of  Political  Economy,  Uni- 
versity of  North  Carolina,  Chapel  Hill,  North  Carolina 

30,  49,  62,  72,  8s,  99,  117 

Ray,   Walter  T.,   150  Lloyd   Avenue,   Edge  wood,   Pennsyl- 
vania   30,  49,  62,  72,  86,  99,  117 


.T 


Richardson,     Gardner,    Assistant     Publisher,     'The    Inde- 
pendent," New  York  City  30,  50,  62,  72,  86,  99,  117 

Robinson,  Philip  A.,  107  Antrim  Street,  Cambridge,  Massa- 
chusetts   31,50,  62,  72,  86,  99,  117 

Saeger,  Henry  R.,  Professor  of  Political  Economy,  Colum- 
bia University,  New  York  City 31,  50,  62,  72,  86,  100,  117 

Smith,  J.  Allen,  University  of  Washington,  Seattle,  Wfash- 
ington 31,  51,  62,  73,  86,  100,  118 

Stone,  N.  L,  Tariff  Expert,  Department  of  Commerce  and 

Labor,  Washington,  D.  C 31,  51,  63,  73,  87,  100,  118 

Sumner,  George  S.,  Pomona  College,  Claremont,  California 

32,  51,  63,  73,  87,  100,  118 

Symmes,    Frank    J.,  Monadnock    Building,   San  Francisco, 

California 32,  53,  63,  73,  87,  100,  118 

TiLLiNGHAST,  J.  A 32,  53,  63,  73,  '87,  100,  118 

TucKEY,  Edson  Newton,  214  Comstock  Avenue,   Syracuse, 

New  York 32,  51,  63,  74,  87,  loi,  119 

Waller,  E.  B.,  Maryville  College,  Maryville,  Tennessee 

33,  52,  63,  74,  87,  loi,  119 

Walsh,  C.  M.,  Bellport,  Long  Island,  New  York 

33,  52,  63,  74,  87,  loi,  119 

Warner,    A.    J.,    President,    Bimetallic    Union,    Gainesville, 

Georgia  23,  52,  63,  75,  88,  loi,  119 

Westen HAVER,  D.  C,  Lawyer,  Garfield  Building,  Cleveland, 

Ohio  34,  52,  63,  75,  102,  120 

White,    Horace,    Editor,    New    York    Evening    Post,    New 
York  City  34,  63,  75,  88,  102 

Wicker,   George   Ray,   Dartmouth    College,   Hanover,   New 

Hampshire  34,  52,  64,  75,  88,  102,  120 

WiLDMAN,  M.  S.,  Assistant  Professor  of  Economics,  Univer- 
sity of  Missouri,  Columbia,  Missouri,  ...35,  53,  64,  76,  88,  121 

Woodford,  A.  B.,  Rector,  Hopkins    Grammar    School,    New^ 
Haven,  Connecticut 35,  53,  64,  76,  88,  102,  121 

Zartman,  Lester  W.,  Yale  University,   New   Haven,   Con- 
necticut   35,  53,  64,  76,  88,  102,  121 


16 


ANSWERS  TO  THE  FIRST   QUESTION.'*' 

''I  think  that  there  are  such  distinctions,  but  that  the 
use  of  two  words  ^nominal'  and  'reaF  does  not  help  to 
clear  them  up.  The  problem  is  simply: — are  railroad 
rates  now,  in  view  of  the  prevailing  prices  of  railway  la- 
bor and  railway  supplies,  sufficient  to  yield  the  railways 
reasonable  profits.  I  do  not  believe,  on  the  whole,  that 
your  present  quotations  will  throw  much  light  on  this  sub- 
ject. They  simply  put  the  principal  problem  back  a  few 
years — to  1897,  as  I  interpret  your  questions.  If  we  agree 
that  the  prices  of  railway  labor  and  supplies  have  increased 
more  rapidly  than  railroad  rates,  since  1897,  we  know 
nothing  until  it  is  decided  whether  rates  in  1897  were  or 
were  not  more  than  enough  to  yield  reasonable  profits  in 
1897."— T.  S.  Adams. 


"There  is  no  doubt  in  my  mind  that  underlying  the 
whole  process  of  modern  exchange  is  the  distinction  be- 
tween money  prices  and  what  we  may  call  real  prices. 
This  distinction  is  applicable  to  railway  rates  as  it  is  to 
wages  or  the  prices  of  commodities  in  the  market. 
Whether  the  real  railway  rate  is  a  percentage  of  value  so 
that  the  real  rate  varies  directly  with  the  price  of  com- 
modities transported  or  whether  it  is  something  else,  I  am 
not  prepared  to  say.  Certain  it  is  that  the  actual  rate 
means  variable  returns  to  the  railroads." — Eugene  E. 
Agger. 


*The  first  question  was :  "Are  there  in  fact  and  in  actual  prac- 
tice, such  distinctions  between  (a)  nominal  wages  and  real  wages, 
(b)  nominal  prices  and  real  prices,  and  (c)  nominal  railway  rates 
and  real  railway  rates,  as  the  quotations  in  our  letter  of  inquiry 
suggest?" 

17 


"Yes — the  present  nominal  wages,  prices  and  railway 
rates  if  paid  in  silver  under  unlimited  coinage  would  be 
'nominally'  the  same  but  not  really  the  same.  President 
Hadley  is  right.'' — W.  F.  x\llen. 

"Yes,  undoubtedly." — E.   Benjamin  Andrews. 

"There  is  undoubtedly  a  sharp  distinction  between  'real' 
and  'nominal'  wages,  prices  and  railway  rates  to  be  taken 
into  account  in  comparisons  of  their  relative  height  at  dif- 
ferent times  and  places." — C.  C.  Arbuthnot. 

"This  is  the  point  that  I  have  been  hammering  on  for 
years.  Four  years  ago  in  a  discussion  of  the  question  of 
freight  rates  regulation  with  one  of  the  vice-presidents  of 
the  Pennsylvania  Railroad,  after  he  had  raised  the  point 
that  they  were  contented  to  have  matters  go  on  as  they 
were  rather  than  adopt  the  plan  urged  on  his  attention, 
though  he  admitted  that  it  was  workable,  I  brought  up  the 
point  that  under  the  present  system  freight  rates  would 
soon  become  crystallized  under  a  series  of  judicial  rulings 
granting  virtually  vested  rights  to  established  rates  to  all 
shippers,  and  that  if  they  could  not  raise  them,  they 
would  eventually  become  bankrupt  owing  to  the  depres- 
sion of  gold,  of  which  ever  smaller  proportions  of  the  pro- 
duction are  used  in  the  arts,  and  a  greater  proportion  is 
coined."— N.  T.  Bacon. 

"Since  exchange  is  the  sole  criterion  of  value,  or  of 
price,  there  cannot  be  a  difference  between  nominal  and 
real  wages  or  prices. 

"Nominal  rates,  or  indeed,  any- values  or  prices  are 
never  measured  in  money,  A  hundred  years  ago  they 
were  measured  in  silver;  now  they  are  measured  in  gold, 
our  unit  of  value,  the  dollar  being  a  synonym  of  '23.22 
grains  of  pure  gold.'    Not  money  but  the  dollar  is  that  in 


which  values  are  measured.  Money  is  our  medium  of  ex- 
change, dollar  is  a  certain  quantity  of  gold.  If  writers 
would  not  confound  words  and  their  meaning,  there 
would  be  less  need  for  controversy." — Hugo  Bilgram. 

"Yes,  the  following  may  be  taken  as  general  definitions : 

"Nominal  prices — Exchange  value  of  commodity  in 
dollars. 

"Nominal  wages — Exchange  value  of  labor  in  dollars. 

"Real  wages — Exchange  value  of  labor  in  commodities. 

"Real  prices — Exchange  value  of  commodities  in  labor. 

"The  above  gives  general  relations.  The  fact  that  labor 
is  now  more  efficient  in  some  cases  must  be  taken  into  ac- 
count. A  new  series  of  definitions  and  distinctions  may  be 
made  by  considering  the  labor  product  as  a  basis  instead 
of  labor." — John  Balch  Blood. 

"Yes,  undoubtedly." — James  E.  Boyle. 

"Yes,  I  think  there  can  be  no  question  on  this  point.  We 
must  draw  a  clear  distinction  between  the  real  and  nominal 
whether  or  not  the  course  be  due  to  a  depreciation  of  the 
standard,  an  appreciation  of  other  commodities,  or  both." 
— John  E.  Brindley. 

"There  are,  undoubtedly,  such  distinctions." — Charles 
J.  Bullock. 

"Yes." — Victor  S.  Clark. 

"Yes." — John  Franklin  Crowell. 

"Yes,  except  as  to  the  'actual  practice'  if  this  means  the 
everyday  thought  and  usage  of  the  business  world.  In 
most  business  transactions  the  distinction  is  probably  not 
recognized." — F.  R.  Clow. 

19 


'1  think  so.  There  is  often  great  confusion  of  thought 
and  misunderstanding  due  to  the  neglect  of  those  very 
distinctions." — J.  W.  Crook. 

"(a)  There  is  a  distinction  between  nominal  wages  and 
real  wages.  In  a  recent  case  I  tried  relating  to  the  rate 
question  it  was  claimed  by  the  railroad  company  that 
there  had,  inter  alia,  been  an  increase  in  wages  of  engi- 
neers. But  an  engineer  on  the  line  of  its  road  testified 
that  notwithstanding  an  increase  nominally  in  his  pay 
per  hour,  the  size  of  engines  and  trains  disables  him  from 
doubling  back  in  a  run  of  no  miles  and  the  haul  had 
been  increased  from  450-600  tons  per  train  to  1,400-2,000 
tons.  Rise  in  price  of  provisions,  groceries  and  other 
things  has  also  made  the  increase  in  wages  in  some  re- 
spects more  nominal  than  real. 

''(b)  I  am  of  the  opinion  that  there  is  a  well-founded 
distinction  between  nominal  and  real  prices. 

"(c)  I  do  not  altogether  understand  what  is  meant  by 
nominal  railway  rate  as  distinguished  from  real  railway 
rate.  I  understand  that  in  as  far  as  a  railway  rate  is  pro- 
portioned to  value,  it  can  be  capable  of  estimation  as  a 
burden  on  the  disposition  of  the  article,  at  a  point  other 
than  the  point  of  production.  But  rates  are  rarely  made 
on  the  basis  of  what  the  article  can  bear,  except  when  a 
foreign  or  distant  market  is  to  be  thrown  open  to  the  arti- 
cles or  products  of  a  given  section  of  the  country.  In  such 
cases,  the  rate  is  fixed  with  reference  to  the  value  of  the 
commodity  transported.  But  for  the  most  part,  I  take  it 
nominal  rates  obtain.  And  yet  shippers  constantly  com- 
plain of  these  nominal  rates  because  they  are  discrimina- 
tive or  unreasonable,  and  tend  to  put  them  out  of  business. 
So  that  nominal  rates  have  some  reference  to  value  of  the 
commodity.  Nevertheless  a  comparison  of  the  rates  of 
the  railroads,  with  the  increased  cost  of  maintaining  them, 
and  the  increased  price  received  for  goods  and  services,  is 

20 


most  proper,  in  my  opinion,  in  order  to  ascertain  whether 
all  conditions  being  considered,  the  railroads  are  getting 
what  they  are  entitled  to." — Morris  M.  Cohn. 

"In  my  opinion,  yes.  Wages  are  to  the  average  wage 
earner,  what  he  can  purchase  with  them.  Wages  of  rail- 
way employees  differ  widely  in  different  parts  of  the 
United  States.  The  nominal  difference,  however,  is  con- 
siderably more  than  the  real  difference  between  the 
North  and  South,  for  example.  A  similar  distinction 
though  not  always  quite  so  clear,  exists  between  nominal 
and  real  prices  and  nominal  and  real  railway  rates." — F. 
S.  Crum. 

''Yes." — John  Cummings. 

"Undoubtedly:  though,  as  a  matter  of  phraseology,  I 
dislike  the  expression  'nominal  prices.'  A  price  is  a  fact. 
What  you  mean  by  nominal  prices  is  better  called  relative 
prices,  in  my  opinion." — W.  M.  Daniels. 

"Real  as  against  nominal  (money)  wages  point  to  the 
actual  purchasing  power  of  the  wages  as  translated  into 
the  things  for  which  the  wages  are  commonly  and  gener- 
ally expended ;  to  talk  of  real  as  against  nominal  prices  is 
terminological  nonsense. 

"  'Nominal'  railway  rates  can  rightly  mean  noth- 
ing but  these  rates  expressed  in  money;  real  rail- 
way rates  must  mean  these  rates  as  translated  into 
general  purchasing  power  over  commodities  in  general. 
Unchanged  real  rates  cannot,  then,  rightly  indicate  an 
unchanged  ratio  between  the  transportation  charge  and 
the  market  value  of  the  goods  transported,  since  the  pur- 
chasing power  expressed  in  the  freight  charge  is  not  to  be 
assumed — either  accurately  or  approximately  to  be  ex- 
pended in  those  goods  solely  which  are  transported ;  labor 

21 


services  in  general,  houses,  fuel  for  railroad  use,  and  a 
wide  range  of  expenditure  must  disturb  the  acceptability 
for  this  formulation.  Rather  must  the  test  of  stability  of 
rates  be  referred  to  the  general  principles  of  the  tabular 
or  multiple  standard." — H.  T.  Davenport. 

"(a)  There  is  a  distinction  between  nominal  a,nd  real 
wages. 

''(b)  The  question  is  absurd.  There  is  but  one  kind  of 
prices. 

"(c)  I  do  not  understand  this." — Davis  R.  Dewey. 

"(a)  Yes. 

*'(b)  No.  This  is  a  contradiction  of  terms  unless  there 
are  two  kinds  of  money  in  use  at  the  same  time,  as,  for 
example,  in  a  country  using  inconvertible  paper  money  or 
silver  when  gold  is  the  real  standard.  If  you  have  in 
mind  difference  in  price  at  different  periods,  this  is  an 
unhappy  way  of  stating  the  matter.  Which  period  shall 
we  take  as  the  real  price  period? 

"(c)  I  cannot  regard  this  as  an  accurate  way  of  using 
terms  having  a  perfectly  definite  meaning  in  the  case  of 
wages.  Same  criticism  as  under  (b)." — Carroll  W. 
Doten. 

"The  distinction  between  nominal  wages  and  real  wages 
is  well  known  to  economists.  For  practical  purposes  it  is 
well  understood  by  those  who  work  for  wages  and  salar- 
ies. I  have  often  heard  it  remarked  that  while  wages  had 
perhaps  risen  to  some  extent  prices  had  advanced  more 
rapidly  still,  thus  leaving  the  wage  earner  poorer  than  be- 
fore. Except  in  one  or  two  books  I,  have  not  seen  the  ap- 
plication extended  to  railway  rates." — Garrett  Droppers. 

"Yes,  the  distinction  between  nominal  (money)  wages 
and  real  wages  has  long  been  recognized.    Variations  in 

22 


the  former  do  not  necessarily  imply  variations  in  the  lat- 
ter. Real  wages  have  not  advanced  as  fast  as  money 
wages  in  the  last  ten  years.  In  the  free  silver  controversy, 
one  of  the  best  arguments  addressed  to  workingmen  was 
that  however  much  their  money  wages  might  increase  in 
the  transition  to  a  silver  standard  prices  would  advance 
still  faster  and  that  real  wages  would  decrease  synchron- 
ously with  an  increase  in  money  wages.  Something  like 
this,  I  think,  occurred  during  the  greenback  era.  The 
distinction  between  nominal  and  real  railway  rates,  is,  I 
think,  similar." — C.  F.  Emerick. 

"(a)  Yes. 
"(b)  Yes. 
"(c)  Yes."— A.  B.  Fairchild. 

"This  question  should  certainly  be  answered  in  the  af- 
firmative. The  distinction  applies  to  wages,  prices  and 
railway  rates." — Fred  R.  Fairchild. 

"Yes." — Irving  Fisher. 

"There  are,  undoubtedly,  in  fact  and  in  practice,  dis- 
tinctions between  nominal  and  real  wages,  prices  and  rail- 
way rates ;  but  your  circular  is  somewhat  confused  as  to 
the  principle  of  the  distinction.  The  practically  and  hu- 
manly important  distinctions  are  between  the  mere 
amounts  of  money  received  in  a  given  time  (not  for  a 
given  amount  of  produce  or  transportation)  by  laborers 
and  by  manufacturing  and  railway  capital  and  the  general 
purchasing  power  of  the  money  or  nominal  wages,  prices 
or  rates.  Real  wages  depend  upon  the  purchasing  power  of 
the  money  earned  by  the  laborer  and  not  upon  the  part  of 
the  value  of  the  product  paid  to  the  laborer.  Real  railway 
rates  are  not  to  be  ascertained  by  noting  what  part  of  the 
values  of  the  goods  transported  must  be  paid  for  transpor- 


tation.  The  important  point  to  note  in  wages  is  how 
much  the  laborer  earns  in  a  day  or  year,  not  how  much 
he  gets  per  unit  of  output;  and  the  important  thing  to 
note  in  transportation  is  how  much  the  railway  earns,  not 
how  much  it  charges  for  carrying  a  ton  or  a  bushel/' — 
WiLLARD  C.  Fisher. 

"Yes — to  all  three." — J.  D.  Forrest. 

"Yes,  without  a  doubt. 

"Yes. 

"Yes." — A.  G.  Frandenburgh. 

*'Yes." — George  P.  Garrison. 

"(a)  Yes. 
"(b)  Yes. 

"(c)  Yes,  though  I  should  not  accept  Dr.  Merritt's  de- 
finition of  real  rates  as  adequate." — David  I.  Green. 

"There  are  doubtless  such  distinctions.  In  case  of  rail- 
way rates,  however,  the  distinction  might  be  called  sec- 
ondary, i.  e.,  it  does  not  have  to  do  directly  with  satisfac- 
tion or  psychic  income  or  consumers  as  is  the  case  with 
laborers.  Railway  stockholders  can  hardly  realize  de- 
creased 'real  railway  rates'  until,  as  consumers,  they  run 
up  against  decrease,  for  instance,  while  a  contemporaneous 
decrease  in  'real  prices,'  or  increase  in  real  wages,  might 
offset  such  a  decrease." — Lewis  H.  Haney. 

"Yes,  to  all  three  divisions  of  this  question." — W.  O. 
Hart. 

"Yes,  disregarding  economic  friction  and  monopoly  in- 
fluences ;  real  wages,  commodity  prices,  and  service  rates 
tend  to  remain  proportional;  and  nominal  wages,  prices 

24 


and  rates,  being  functions  of  the  former  should  also  re- 
main proportional." — R.  H.  Hess. 

''Yes." — ^JosEPH  French  Johnson. 

"There  are.  The  value  of  a  dollar  in  the  United  States 
is  practically  the  same  thing  as  the  purchasing  power  of 
23  22-100  grains  of  pure  gold,  because  that  many  grains 
of  pure  gold  can  readily  be  converted  into  a  dollar.  Al- 
terations in  the  supply  of  gold  relative  to  the  demand  re- 
sult in  alterations  in  the  general  price  and  wage  levels. 
A  man's  wages  are  to  be  measured  not  by  the  number  of 
dollars  he  receives,  but  by  the  purchasing  power  of  those 
dollars." — E.  W.  Kem merer. 

"There  is  a  distinction  between  nominal  wages  and  real 
wages,  nominal  prices  and  real  prices,  nominal  railway 
rates  and  real  railway  rates.  Nominal  wages,  prices  and 
rates  are  the  money  rate ;  real  v/ages,  prices  and  rates  are 
the  goods  or  means  of  satisfaction  which  the  money  will 
buy." — David  Kinley. 

"Yes,  unquestionably." — M.  A.   Kursheedt. 

"(a)  Yes. 
"(b)  Yes. 
"(c)  Yes." — Charles  H.  Leeds. 

"There  can  be  no  question  to  my  mind  but  that  there 
are  real  and  vital  distinctions  between  nominal  and  real 
wages,  prices  and  rates.  I  think,  however,  that  for  all 
practical  purposes  we  may  assume  that  the  relation  be- 
tween nominal  and  real  in  each  case  is  about  the  same." 
— W.  H.  Lough,  Jr. 

"Of  course  the  purchasing  power  of  wages  is  different 

25 


OF  -rue 


from  the  nominal  rate  or  price  of  labor  as  was  clear  dur- 
ing the  Civil  War."— Arthur  T.  Lyman. 

'There  are,  to  be  sure.  A  dollar  is  worth  no  more  than 
it  will  buy  in  goods  and  services." — Roswell  C.  McCrea. 

"Yes,  in  all  cases ;  but  in  judging  real  and  nominal  rail- 
way rates  changes  in  interest  rates  should  also  be  consid- 
ered for  the  cost  of  operating  a  railway  includes  fixed 
charges  on  its  debt  as  much  as  labor  and  material." — 
John  Martin. 

"Yes." — Royal  Meeker. 

"Yes,  certainly.  The  distinction  between  the  apparent 
and  the  actual  is  of  fundamental  significance  in  the  care- 
ful and  thorough  investigation  of  all  subjects  whatso- 
ever. The  great  world,  hasty  and  superficial,  commonly 
rests  content  with  the  apparent." — Charles  W.  Mixter. 

"There  is  no  distinction  made  between  nominal  and 
real  wages,  prices  or  railroad  rates,  nor  can  there  be  any 
distinction  unless  some  past  or  future  standard  is  set  up 
with  which  to  compare  present  rates.  Even  with  this 
comparison  before  us,  inasmuch  as  these  rates  are  ex- 
pressed in  terms  of  money,  the  question  resolves  itself  into 
a  determination  of  whether  or  not  the  purchasing  power 
of  the  dollar  has  increased  or  decreased.  Wages,  prices, 
railroad  rates,  and  other  things  are  subject  to  change  ac- 
cording to  conditions  and  these  rates  are  real  to-day  and 
nominal  as  compared  with  yesterday  or  a  year  ago." — 
James  B.  Morman. 

"(a)  There  is  in  fact  and  actual  practice  a  nominal 
wage  and  a  real  wage.  In  some  classes  of  employment  a 
high  nominal  wage  does  not  necessarily  mean  a  high  real 

26 


wage.  It  is  not  uncommon  to  find  corporations  raise  or 
lower  the  nominal  wages  of  some  of  their  employees  ac- 
cording as  they  are  employed  at  headquarters  (without  ex- 
penses) or  on  the  road  (with  expenses).  To  the  extent 
that  many  railroad  employees  are  subject  (from  the  gen- 
eral uncertainty  of  where  their  presence  is  required)  to 
more  expense  than  an  ordinary  clerk  or  salesman,  their 
nominal  wages  might  be  expected  to  be  a  little  higher. 
Adequate  details  on  this  distinction  may,  if  desired,  be 
found  in  'Marshall's  Principles,  London,  1890,  page  576, 
et  seq.' 

"(b)  There  is  also  in  fact  and  practice  a  distinction  be- 
tween a  nominal  price  and  a  real  price.  An  increase  in 
the  supply  of  gold  (a  depreciated  dollar)  may  be  offset  by 
a  decrease  in  a  marginal  utility  of  the  goods  offered  for 
sale,  in  which  case,  we  would  expect  no  change  in  the  pre- 
vious price. 

"(c)  The  distinction  between  nominal  railway  rates  and 
real  railway  rates  referred  to  in  the  quotation  from  Dr. 
Merritt's  essay,  is  confusing.  Dr.  Merritt's  statement 
'while  real  rates  consist  of  a  percentage  of  the  value  of 
the  commodities  transported'  (italics  mine)  is  different 
from  his  implication  that  Veal  rates  are  the  amount  of 
labor  and  materials  which  the  money  received  for  trans- 
portation will  buy.'  American  railways  are  primarily 
concerned  in  the  transportation  of  goods  and  not  values  in 
the  fixing  of  rates  apart  from  the  complementary  question 
of  the  inclusion  of  insurance.  Cost  of  transportation 
varies  directly,  or  nearly  so,  with  the  material  character 
of  the  goods,  and  as  value  depends  on  utility  or  cost  of 
production,  which  has  no  relation  to  such  material  charac- 
ter, there  is  no  relation  between  the  cost  of  transportation 
and  the  value.  For  example,  a  rate  based  on  the  cost  of 
transporting  a  ton  of  coal  would  not  materially  differ  from 
one  based  on  the  cost  of  transporting  a  ton  of  copper ;  but 
if  the  rates  were  based  on  the  values  of  the  respective 

27 


commodities  then  indeed  a  great  difference  would  appear. 
For  this  reason  I  can  only  accept  the  existence  of  real  rail- 
way rates  as  'the  goods  purchasable  with  the  nominal 
(money)  rates.'  "—George  S.  Moynahan. 

"(a)  There  is  such  a  distinction  in  the  case  of  wages 
and  it  is  fully  recognized  by  most  economists. 

"(b)  There  is  no  such  distinction  in  the  case  of  prices 
for  it  is  excluded  by  the  definition  of  price  as  the  relation 
between  the  value  of  a  commodity  and  that  of  the  unit 
of  standard  money.  Price  is  the  nominal  cost  of  a  com- 
modity to  a  purchaser,  real  cost  may  be  quite  different, 

"(c)  As  I  have  long  urged,  there  is  a  distinction  in  the 
case  of  railway  rates  that  is  fully  equivalent  to  that  in  the 
case  of  wages.  Dr.  Merritt  recognizes  the  basic  principle 
but  fails  to  apply  it  logically. 

"As  to  all  the  distinctions  suggested  in  your  inquiry,  it 
is  clear  that  there  are  two  points  of  view  from  which  real 
wages,  real  cost  or  real  railway  rates  may  be  considered. 
In  the  case  of  wages,  the  term  Veal  wages'  has,  through 
the  usage  of  economists,  come  to  mean  the  purchasing 
power  of  the  wages  received  when  expended  to  supply  the 
wants  of  the  wage  earner.  Thus  the  study  of  real  wages 
has  been  inseparable  from  the  study  of  the  budget  of 
typical  wage  earners.  Wages  might  have  been  consid- 
ered, on  the  other  hand,  from  the  point  of  view  of  the  em- 
ployers, and  in  that  case,  the  term  Veal  wages'  might  have 
come  to  mean  the  cost  in  the  articles  produced  by  the  em- 
ployer, of  the  labor  of  the  wage  earner.  This  is  not  pre- 
cisely the  thing  intended  by  'wages  in  kind'  and  a  term 
which  would  express  it  might  still  be  useful. 

"As  the  term  'real  railway  rates', has  acquired  no  defi- 
nite meaning,  and  it  can  plainly  be  used  either  from  the 
point  of  view  of  the  purchaser  or  that  of  the  seller  of 
railway  transportation,  it  is  necessary  when  using  it,  to  in- 
dicate which  is  meant.    Real  railway  rates,  from  the  point 

28 


of  view  of  the  traveller  or  shipper,  must  mean  an  expres- 
sion of  rates  in  terms  of  labor  performed  or  the  commodi- 
ties produced  in  order  to  obtain  the  money  to  pay  the 
nominal  railway  rates; — from  the  point  of  view  of  the 
carrier,  however,  the  correct  conception  of  real  railway 
rates  requires  their  expression  in  terms  of  the  purchas- 
ing power  of  the  nominal  rates  when  expended  for  the 
ordinary  requirements  of  railway  corporations,  that  is,  for 
labor,  equipment,  fuel  or  other  materials  and  supplies, 
and  as  recompense  for  the  use  of  capital  invested  in  rail- 
ways."— H.  T.  Newcomb. 

"The  terms  'nominal  and  real  wages'  are  very  gener- 
ally recognized,  being  based  on  the  standard  of  living  se- 
cured by  a  given  service  of  labor ;  the  terms  'nominal  and 
real  price  and  rates'  have  no  such  basis,  since  the  stan- 
dard of  living  of  those  who  sell  goods  and  those  who 
charge  railroad  rates  depends  not  on  prices  and  rates,  but 
on  profits,  i,  e,,  on  the  degree  to  which  they  can  reduce 
their  cost  below  the  price  or  rates  in  the  market/' — L.  W. 
Parish. 

''Yes,  most  decidedly  so." — Julius  H.  Parmelee. 

"There  are  certainly  such  distinctions  between  nominal 
and  real  wages,  prices  and  railway  rates  as  indicated  in 
your  letter  of  inquiry.  This  fact  is  universally  recognized 
by  the  economist.  As  far  as  I  know  there  is  no  econo- 
mist who  opposes  the  idea.  The  fact  is  recognized  by  the 
business  man  and  the  laborer,  as  well  as  by  the  economist, 
in  actual  practice,  consciously  or  unconsciously." — War- 
ren M.  Persons. 

"Most  certainly."— Carl  C.  Plehn. 

"There  are,  of  course,  and  while  often  very  difficult  io 

2q 


determine  they  must  always  form  the  basis  of  our  calcula- 
tions/'— ^Jesse  E.  Pope. 

"Beyond  question  there  are.  No  truth  is  better  recog- 
nized/'— H.  H.  Powers. 

"Yes."— L.  G.  Powers. 

"Money  is  a  fluctuating  standard,  and  a  comparison  of 
wages,  prices  and  rates  for  any  year  wath  any  other  year, 
to  be  accurate,  must  take  into  account  this  fluctuation  in 
money  value." — Lawson  Purdy. 

"Comparing  the  values  of  commodities  purchased  at 
different  times  for  purposes  of  consumption  as  the  stan- 
dard there  is  no  doubt  a  difference  between  real  and 
nominal  money  wages." — H.  W.  Quaintance. 

"Yes,  and  clear  distinction  must  always  be  made  be- 
tween nominal  wages  and  real  wages,  nominal  prices  and 
real  prices,  nominal  railway  rates  and  real  railway  rates." 
— Charles  Lee  Rarer. 

"(a)  There  are  undoubtedly  such  distinctions  in  fact; 
and  even  unschooled  labor  employees  and  comparatively 
unread  laborers  have  to  my  knowledge  adjusted  differ- 
ences under  the  mutually-accepted  axiom  that  'money  is 
not  worth  as  much  in  trade  now  as  it  was  a  few  years 
ago/ 

"(b)  The  same  as  (a). 

"(c)  Yes;  even  the  land  buyer  in  a  new  region  calcu- 
lates how  much  less  a  percentage  of  ,the  Chicago  price  for 
grain  and  cattle  will  be  left  to  him  in  case  he  keeps  his  old 
farm  in  Illinois." — Walter  T.  Ray. 

"Decidedly  'y^s.'     The  very  fact  that  while  nominal 

30 


railway  rates  have  increased  and  real  railway  rates  have 
decreased  proves  that  a  very  important  distinction  exists." 
Gardner  Richardson. 

"Assuredly  such  distinctions  exist,  but  it  is  very  diffi- 
cult to  trace  accurately  the  curves  of  divergence  between 
the  nominal  and  the  real  scales,  or  to  ascertain  the  dis- 
tance between  them  at  any  time  for  a  generic  group  of 
prices." — Philip  A.  Robinson. 

"(a)  Yes. 

*'(b)  *Real  prices'  seems  to  me  a  misname  but  this  is  a 
matter  of  definition.  Certainly  gold  prices  have  risen, 
while  the  ratios  of  exchange  among  commodities  gener- 
ally have  changed  but  little. 

"(c)  I  do  not  like  this  nomenclature  either,  but  agree 
as  to  the  reality  of  the  distinction  it  refers  to." — Henry 

R.   S EAGER. 

"I  believe  that  the  distinction  between  real  and  nominal 
wages  and  real  and  nominal  value  is  a  valid  one." — J. 
Allen  Smith. 

"(a)  Yes. 

"(b)  No. 

"(c)  Yes,  if  we  agree  to  understand  by  nominal  wages, 
prices  and  rates  those  expressed  in  terms  of  money,  and 
by  real  wages,  prices  and  rates  those  expressed  in  terms 
of  all  other  commodities.  It  does  not,  however,  neces- 
sarily follow  that  because  there  has  been  a  general  rise  in 
prices  that  the  intrinsic  value  of  gold  has  depreciated.  I 
do  not  believe  in  the  quantity  theory  of  money.  While 
wilHng  to  admit  that  a  sudden  increase  in  the  produc- 
tion of  gold  is  apt  to  affect  its  purchasing  power  in  terms 
of  other  commodities,  I  do  not  think  that  this  can  go  on 
for  any  length  of  time,  unless  there  is  also  a  change  in  the 

31 


cost  of  production  of  the  gold  metal.  The  fact  that 
prices  of  different  commodities  have  not  advanced  to  the 
same  extent  and  that  articles  controlled  by  trusts  or  en- 
joying a  natural  monopoly  have  risen  most  in  price,  while 
prices  of  competitive  articles  have  either  not  risen  at  all 
or  greatly  lagged  behind,  points  to  the  presence  of  other 
causes  than  the  depreciation  of  the  intrinsic  value  pf  gold 
in  this  movement."— N.  I.  Stone. 

''(a)  Yes. 
"(b)  Yes. 
''(c)  Yes." — George  S.  Sumner. 

''Yes." — Frank  J.  Symmes. 

"(a)  Unquestionably  we  must  recognize  a  distinction 
between  nominal  and  real  wages.  For  instance,  salaried 
men,  receiving  the  same,  or  even  twenty  per  cent,  more 
salary,  than  in  1897,  are  finding  that  they  can  no  longer 
command  the  same  standard  of  living  to-day  as  enjoyed 
ten  years  ago. 

"I  feel  too  little  informed  on  the  immensely  complex 
question  of  railroad  rates  to  venture  an  opinion  of  any 
value." — J.  A.  Tillinghast. 

'There  is  a  valid  distinction  between  the  value  of  a 
commodity  or  service  expressed  in  terms  of  money,  and 
its  value  expressed  in  terms  of  other  commodities  and  ser- 
vices. That  distinction  is  as  legitimate  when  applied  to 
the  value  of  railway  services  as  when  applied  to  the 
value  of  personal  services.  But  use  of  the  terms  'nominal' 
and  'real'  in  connection  with  price  or  rates  involves  con- 
fusion— or,  at  any  rate,  necessitates  agreement  upon  defi- 
nitions. If  by  price  is  meant  value  in  terms  of  money  (a 
common  useful  definition)  there  can  be  no  distinction  be- 
tween 'nominal'  and  'real'  price.     If  by  rates  is  meant 

32 


published  and  unpublished  charges  for  railway  service,  in 
terms  of  money,  there  is  no  such  thing  as  'real'  rates  as 
contrasted  with  'nominaF  rates.  But  if  by  price  and  rates 
we  mean  merely  ratios  of  exchange  in  terms  of  anything 
and  everything,  then  it  is  important  to  distinguish  between 
money  rates  and  other  rates.  But  why  one  should  be  con- 
sidered any  more  'real'  than  another  is  a  question. 

''Without  attempting  to  settle  the  question,  here,  as  to 
which  of  the  above  definitions  should  be  employed,  there 
is,  in  any  case,  no  necessary  connection  or  correspondence, 
in  theory,  between  the  above  distinction  regarding  (so- 
called)  'nominal'  and  'real'  wages  and  'nominal'  and  'real' 
rates  as  defined  in  the  accompanying  quotations  from 
President  Hadley  and  Dr.  Merritt.  'Real  rates'  are  there 
defined  as  'a  percentage  of  the  value  of  commodities  car- 
ried.' I  do  not  know  that  'real  wages'  have  ever  been  de- 
fined as  a  'percentage  of  the  value'  of  the  particular  ser- 
vices rendered.  It  is,  therefore,  not  conducive  to  clear- 
ness, to  group  the  terms  'wages',  'interest'  and  'rates'  and 
apply  to  them  all  alike  the  terms  'nominal'  and  'real,'  when 
the  latter  have  different  meanings  according  as  they  are 
applied  to  one  or  another  of  the  former  terms.'  " — E'dson 
Newton  Tuckey. 

"Yes."— E.  B.  Waller. 

"Yes,  in  all  three  cases  (for  first  two  see  my  Funda- 
mental Problem  in  Monetary  Science,  pp.  291-4,  and  my 
Measurement  of  General  Exchange  Value,  pp.  465-8), 
where,  however  instead  of  'real  price'  I  use  'true  price.'  " 
C.  M.  Walsh. 

"Substantially  yes.  Nominal  wages  are  wages  in 
money ;  real  wages  consist  of  what  money  wages  will  buy 
or  exchange  for.  Price  and  value  are  not  equivalent  terms 
and  should  not  be  confounded,  one  with  the  other.    Price 

33 

2—3 


is  the  value  of  a  thing  in  money.  A  rise  in  prices  is  the 
same  thing  as  a  fall  in  the  value — ^purchasing  power — of 
money,  hence,  if  no  more  money  of  less  purchasing  power 
be  given  as  wages,  then  real  wages  are  reduced. 

"Nominal  railway  rates  are,  of  course,  rates  in  money. 
Real  rates  are  what  the  money  rates  will  buy  of  labor, 
supplies  and  material  required  for  operating  and  main- 
taining roadway  and  equipment.  If  money  of  reduced 
value,  or  purchasing  power,  is  paid  to  railroads  as  railway 
rates,  it  becomes  equivalent  to  a  reduction  of  rates." — A. 
J.  Warner. 

"I  think  not.  They  are  juggling  with  words." — D.  C. 
Westenhaver. 

"No,  but  there  are  fluctuations  in  the  prices  of  com- 
modities both  general  and  special.  I  think  there  has  been 
an  increase  in  general  prices  since  1897,  due  to  the  large 
output  of  gold  and  that  there  is  now  a  reaction  and  de- 
cline, due  to  the  panic  and  crisis  of  1907.  I  think  that 
this  reaction  will  soon  pass  away  and  that  prices  will  re- 
cover and  resume  the  progressive  increase  above  noted, 
for  the  reason  mentioned." — Horace  White. 

"I  do  not  weigh  the  following  words  carelessly,  as  I 
have  long  been  interested  in  the  line  of  inquiry  you  are 
starting.  And  I  want  to  commend  your  course,  which 
seems  not  only  prudent  but  also  very  auspicious  as  an 
omen  of  things  to  come. 

"I  believe  there  are  such  distinctions  as  are  here  noted, 
and  that  recognition  of  them  is  absolutely  necessary  to 
correct  thinking  and  correct  conclusions  in  many  fields  of 
economic  study. 

"Hbwever,  I  do  not  think  that  'nominal'  and  'real'  are 
well  chosen  words  to  describe  the  distinction  in  rates  be- 
cause the  distinction  differs  from  that  in  the  other  two 

34 


cases,  where  the  words  have  long  had  a  settled  meaning. 
In  other  words,  I  think  that  there  is  a  distinction  in  (a), 
(b)  and  (c),  but  that  it  leads  to  error  to  define  the  dis- 
tinction in  case  (c)  by  the  same  terms  as  in  (a)  and  (b)." 
— George  Ray  Wicker. 

''There  is  a  real  distinction  between  real  and  nominal 
wages,  real  wages  being  the  sum  of  goods  and  services  re- 
ceived for  services  rendered. 

•'(b)  No  distinction.  Prices  are  values  expressed  in 
terms  of  the  monetary  unit :  any  other  expression  of  value 
is  not  a  price. 

"(c)  'Real  rates'  as  used  by  Merritt  and  Newcomb  are 
not  analogous  to  real  wages.  One  is  return  for  services, 
the  so-called  real  rates  are  a  return  or  measure  of  the  ser- 
vices, a  part  of  cost  or  production  to  the  shipper.  This 
means  nothing  to  the  carrier.  His  outlay  is  in  terms  of 
money  and  his  receipts  can  only  be  considered  in  the  same 
terms.'' — M.  S.  Wildman. 

"I  do  not  believe  there  is  in  actual  practice  any  very 
clear  distinction  between  the  two.  It  exists  in  the  mind 
only  of  imaginative  statisticians." — A.  B.  Woodford. 

"Most  certainly." — Lester  W.  Zartman. 


35 


ANSWERS  TO  THE  SECOND  QUESTION.* 

*Tor  reasons  stated  under  i,  I  do  not  think  your  ques- 
tions have  much  significance.  Granting  that  this  general 
method  of  approach  is  valuable,  it  still  remains  true:  (a) 
that  1897  is  a  bad  year  from  which  to  begin  the  compari- 
son; and  (b)  that  the  problem  is  indefinitely  complicated 
by  the  changing  volume  of  business.  Rates  might  theor- 
etically decline  while  prices  of  labor  and  supplies  increase, 
and  yet  pay  higher  dividends  to  the  holders  of  railway 
stocks."— T.  S.  Adams. 

"The  distinction  is  important  from  the  point  of  view  of 
distribution  of  income.  To  the  extent  that  the  charges 
that  a  railway  has  to  meet  are  fixed  sums  or  percentages 
the  distinction  is  not  important  but  to  the  extent  that  the 
charges  are  variable— fluctuating  with  market  conditions 
— the  distinction  is  of  tremendous  importance." — Eugene 
E.  Agger. 

"It  is  important.  Under  a  depreciated  currency  the 
nominal  revenue  might  be  sufficiently  above  the  nominal 
expenses  in  any  business  to  pay  the  interest  on  the  capital 
involved,  provided  that  interest  could  be  paid  in  the  same 
depreciated  currency.  But  the  surplus  that  would  be  left 
over  for  improvements  or  extensions  would  not  add  to  the 
real  value  of  the  property  an  amount  equal  to  what  it 
would  have  been  had  the  currency  been  on  a  sound  basis. 
This  assumes  of  course  that  the  original  capital  investment 
was  made  on  the  basis  of  sound  currency  although,  if  not, 


*The  second  question  was:     "If  there  is  such  a  distinction;  is 
it  important  and  what  is  the  extent  of  its  importance?" 

36 


there  would  still  be  a  difference  between  the  nominal 
value  and  the  real  value  of  the  surplus." — W.  F.  Allen. 

"It  is  important,  making  a  difference  of  from  twenty 
to  thirty  per  cent." — E.  Benjamin  Andrews. 

"No  significant,  relative  estimate  of  two  or  more  eco- 
nomic situations  can  be  made  without  reckoning  with  this 
distinction;  e.  g.,  wages  in  Europe  and  in  the  United 
States,  or  railway  rates  in  India  and  England." — C.  C. 
Arbuthnot. 

"After  many  years  of  thought  I  have  come  to  regard 
the  pay  of  the  unskilled  laborer  as  on  the  whole  the  best 
individual  measure  of  purchasing  power,  but  the  index 
numbers  are  important.  I  consider  it  so  important  that  I 
am  limiting  my  stock-market  investments  to  depreciated 
bonds  and  stocks  having  large  and  long-time  bond  issues 
ahead,  so  as  to  reap  the  advantage  of  payment  in  a  depre- 
ciating medium." — N.  T.  Bacon. 

"Wages  can  be  conceived  in  three  phases.  First,  they 
are  the  product  of  labor ;  second,  they  are  the  money  ob- 
tained for  the  product  of  labor;  and  third,  they  are  the 
goods  obtained  for  the  money  that  was  obtained  for  the 
product  of  labor.  If  competition  were  free,  these  three 
quantities  would,  as  a  rule,  be  precise  equivalents." — 
Hugo  Bilgram. 

"The  above  relations  indicate  that  any  comparison 
should  not  be  made  on  the  basis  of  relative  rates  or  prices, 
but  that  they  should  be  made  on  some  basis  to  show  what 
is  the  relative  share  of  the  various  producers  in  the  pro- 
duct of  which  the  rate  or  price  is  the  measure  of  amount." 
— John  Balch  Blood. 

Z7 


'This  is  an  important  distinction.  Considered  in  con- 
nection with  what  economists  call  ^increasing  returns' 
(i.  e.,  growth  of  traffic  with  no  corresponding  growth  of 
investment  in  labor,  material,  etc.)  it  is  a  distinction  of  in- 
stant, immediate,  and  overwhelming  importance." — 
James  E.  Boyle. 

"Yes,  it  is  of  vital  importance.  The  same  laws  which 
govern  ordinary  wages  also  govern  railway  rates  and  the 
railroad  corporations,  in  my  judgment,  have  the  same 
right  to  a  consideration  of  real  rates  as  the  wage  earner 
has  to  a  consideration  of  real  wages." — ^John  E.  Brind- 

LEY. 

"The  distinction  is  highly  important  in  the  study  of  cer- 
tain questions.  Advance  in  money  wages  since  1897  have 
not  meant  equivalent  increases  in  real  wages.  By  a  par- 
ity of  reasoning,  the  same  thing  is  true  of  nominal  in- 
creases in  railway  rates.  President  Hadley's  statement 
quoted  in  your  letter  is  undoubtedly  correct." — Charles 
J.  Bullock. 

"The  distinction  must  be  observed  for  an  accurate 
comparison  of  rates  at  different  periods  or  in  different 
countries." — Victor  S.  Clark. 

"I  think  it  is  important.  Such  distinctions  are  neces- 
sary to  correctly  compare  different  countries  with  each 
other  and  conditions  in  the  same  country  at  different 
times.  It  has  bearing  in  the  tariff  question,  for  real  wages 
and  prices,  not  nominal  ones,  are  significant.  By  neg- 
lecting the  distinction  great  injustice  may  be  done  salaried 
people  like  teachers  and  the  railroa'd  may  suffer  by  a  mis- 
informed or  ignorant  public  opinion  in  these  matters. 
For  the  speculative  world  to  ignore  it  may  be  fatal  not 
only  to  them  but  the  general  public  as  well."— J.  W. 
Crook. 

38 


''Its  importance  is  measured  by  the  degree  of  difference 
in  the  purchasing  power  of  money  at  different  periods  as 
compared  with  commodities,  being  greatest  when  prices 
are  most  highly  inflated." — ^John  Franklin  Crowell. 

"Very  important  in  all  transactions  between  debtors 
and  creditors  and  where  rates  of  payment  for  goods  or 
services  remain  unchanged  on  account  of  law,  custom,  or 
any  other  reason  whatever.'' — F.  R.  Clow. 

"It  is  claimed  that  real  rates  have  declined  twenty-five 
per  cent  in  less  than  ten  years.  If  so,  conditions  have 
accommodated  themselves  to  this,  so  that  the  gain  is  dis- 
tributed. To  increase  the  rate,  upon  the  theory  that  the 
decrease  has  been  too  great,  will  involve  the  difficulties 
growing  out  of  the  impossibility  of  tracing  the  application 
of  the  real  rate  to  various  commodities  and  articles,  that 
now  form  the  basis  of  commodities  and  classes  in  freight 
tariffs.  An  error  in  distributing  the  increased  charge  for 
transportation  may  affect  most  disastrously  whole  com- 
munities and  sections  of  territory.  A  slight  rise  in  freight 
rates  would  put  brick  manufacturers  in  some  localities 
out  of  business.  Manufacturers  of  fertilizers  would  be 
similarly  affected.  So  would  furniture  manufacturers.'' 
— Morris  M.  Cohn. 

"The  distinction  is  very  important.  Real  wages,  prices 
and  rates  being  the  important  things  to  determine.  This 
can  only  be  done  by  a  careful  statistical  inquiry,  as  real 
wages  are  in  relation  to  the  average  general  purchasing 
power  of  a  dollar,  and  just  so  real  prices  and  real  railway 
rates  are  relative  to  what  the  recipient  can  do  with  the 
sum  charged,  whether  in  renewing  his  supply  of  goods  or 
in  maintaining  the  railway  and  its  equipment  and  earning 
a  fair  degree  of  profit  for  the  stockholders." — F.  S.  Crum. 

39 


*lt  becomes  important  in  proportion  as  the  real  rate 
varies  from  the  nominal  rate.  Where  the  real  rate  varies 
considerably  from  the  nominal,  the  real  rate  alone  should 
be  used." — ^John  Cummings. 

"You  give  too  much  space  for  question  No.  i  and  too 
little  for  No.  2.  As  to  (a)  it  is  true  that  to  the  worker 
an  advance  in  real  wages — in  the  command  over  the  lux- 
uries, conveniences  and  necessities  of  life — is  more  im- 
portant than  an  increase  in  money  receipts,  (b)  The  ex- 
tent of  its  importance  is  determined  by  the  degree  in  which 
relative  prices  have  advanced,  stood  still,  or  receded,  so 
far  as  the  respective  sellers  are  concerned,  (c)  The  ex- 
tent to  which  sellers  of  transportation  have  been  affected 
as  compared  with  the  sellers  of  other  commodities  (in- 
cluding labor)  must  be  determined,  all  other  things  being 
equal,  by  the  relative  decline  in  the  receipts  of  the  respec- 
tive parties.  Of  course,  a  long  statistical  investigation  is 
necessary  to  determine  the  degree  in  which  various  parties 
have  been  affected." — W.  M.  Daniels. 

"No  one  questions  the  fact  that  you  are  trying  to  bring 
out,  but  it  is  misleading  to  make  use  of  the  terms  real 
and  nominal  in  this  way.  It  creates  a  presumption  in  the 
mind  of  the  casual  reader  that  an  injustice  is  being  prac- 
ticed upon  the  railroads  and  that  they  ought  without  ques- 
tion to  be  allowed  to  charge  rates  at  the  present  time  that 
are  as  much  higher  than  their  former  rates  as  the  prices 
of  goods  are  above  the  prices  prevailing  at  a  previous 
period." — Carroll  W.  Doten. 

"The  distinction  is  important,  but  I  do  not  quite  see  how 
it  could  be  applied  in  a  general  way  to  all  charges,  salaries 
and  rates.  If  it  were  applied  to  the  regulation  of  railway 
rates,  why  not  to  taxes,  salaries,  debts  (bonds,  mortgages, 
debentures,  insurance  policies,   etc.).        The  distinction 

40 


might  be  applied  more  logically  to  securing  a  stable  stan- 
dard of  value.  This  application  has  been  suggested  by  cer- 
tain economists  who  have  studied  the  question  of  a  scien- 
tific money  standard." — Garrett  Droppers. 

"All  persons  and  concerns  with  fixed  money  incomes 
are  adversely  affected  by  a  rise  in  prices,  whereas  all  who 
participate  in  advancing  prices  and  have  fixed  sums  in 
money  to  pay  are  the  gainers.  The  gains  of  one  party 
represent  the  losses  of  the  other.  Price  changes,  due  to 
changes  in  the  production  of  gold,  introduce  a  disturbing 
influence  upon  business  affairs  for  the  reason  that  they 
do  not  occur  simultaneously  at  all  points.  If  fluctuations 
in  the  purchasing  power  of  gold  registered  themselves  in 
the  case  of  each  commodity  at  one  and  the  same  time 
with  perfect  nicety,  they  would  be  left  out  of  the  account. 
Such,  however,  is  not  the  case.  In  so  far  as  price  changes 
are  anticipated  as  by  a  rise  in  the  rate  of  interest  if 
prices  are  rising,  they  do  not  disturb  business  affairs." — 
C.  F,  Emerick. 

"So  far  as  railway  rates  affect  the  cost  of  living  the 
distinction  is  important.  The  rate  on  flour  affects  the  real 
price  of  flour." — A.  B.  Fairchild. 

"This  distinction  is  certainly  important,  indeed  fun- 
damental. The  thing  of  real  importance  to  those  who  are 
interested  in  wages,  prices,  railway  rates,  etc.,  is  the  real 
price.  The  nominal  or  money  price  is  more  or  less  a  mat- 
ter of  accident,  depending  on  the  thing  used  as  a  stan- 
dard of  value.  For  example,  if  the  standard  dollar  in  the 
United  States,  which  is  to-day  composed  of  23.22  grains 
of  pure  gold,  had  been  originally  fixed  at  forty-six  grains, 
the  general  level  of  money  prices  would  be  practically 
fifty  per  cent  lower  than  it  is  to-day,  since  the  standard 
would  be  worth  twice  as  much.    Real  prices,  wages,  etc., 

41 


and  the  welfare  and  relative  wealth  of  the  people  would 
be  no  different  from  what  they  are  to-day.  The  funda- 
mental thing  then  is  the  real  price  or  wage  rather  than  the 
nominal  or  money  price  or  wage." — Fred  R.  Fairchild. 

''Yes."— Irving  Fisher. 

'The  distinction,  as  drawn  in  the  answer  above,  is  very 
important.  The  mere  amount  of  money  received  by  la- 
borer, capitalist,  or  any  other  person  signifies  nothing  as 
to  the  conditions  of  life  for  the  person  in  view.  But  the 
amount  of  the  goods  and  services  which  the  money  will 
purchase  signifies  everything.  This  is  the  big  fact,  that 
is  the  theory.  In  actual  life,  of  course,  we  come  soon  to 
carry  in  mind  what  any  money  income  will  command  of 
good  things;  and  then  the  distinction  between  real  and 
nominal  income  is  of  practical  importance  only  as  the  pur- 
chasing power  of  money  changes." — Willard  C.  Fisher. 

"Important — indicating  material  decrease  in  real  fixed 
incomes,  whether  of  railroad,  capitalist,  or  salaried  man." 
— J.  D.  Forrest. 

"There  can  be  no  question  of  its  importance.  Profit 
and  loss  often  rest  upon  it.  Salaries  of  professors  in 
American  colleges  are  nominally  the  same  as  in  1897,  but 
actually  they  are  now  less  than  ten  years  ago.  Of  course 
the  same  would  apply  to  railroad  rates." — ^A.  G.  Fraden- 

BURGH. 

"It  is  so  important  that  no  reliable  conclusion  as  to 
what  are  fair  rates  to  be  charged  by  public  service  cor- 
porations can  be  reached  without  considering  it,  But, 
as  a  matter  of  fact,  if  the  railroads  had  themselves  always 
been  careful  to  observe  this  distinction  and  had  not,  by 
watering  their  stocks,  confused  the  effort  to  determine 

42 


fair  rates,  they  would  be  far  more  consistent  in  emphasiz- 
ing the  distinction  now." — George  P.  Garrison. 

"The  distinction  is  of  importance." — David  I.  Green. 

**In  discussing  its  importance  the  distinction  between 
average  receipts  per  ton  mile  and  net  earnings  must  be  re- 
membered; also  the  public  character  of  the  railway  ser- 
vice. Change  in  character  or  volume  of  traffic  may  change 
average  receipts  without  affecting  net  earnings.  So, 
also  with  changes  in  operating  efficiency. 

"I  understand  you  to  mean  by  'real  rates'  practically  the 
average  net  receipt  per  ton  mile.  It  is  certainly  impor- 
tant to  distinguish  this  from  and  compare  it  with  the  gross 
figure.  But  in  the  questions  now  at  issue  it  is  chiefly  im- 
portant as  a  factor  in  determining  net  income  from  opera- 
tion and  the  rate  of  return  on  private  capital  in  transpor- 
tation."— Lewis  H.  Haney. 

"The  distinction  is  important,  but  it  is  hard  to  describe 
the  extent  of  the  importance.  In  some  sections  of  the 
country  it  is  of  course  greater  than  others;  for  instance, 
in  this  city  the  fuel  problem  is  not  of  the  great  import- 
ance it  is  where  the  winters  are  more  severe.  There  are 
comparatively  few  days  in  this  city  in  vv^inter  when  arti- 
ficial heat  is  required  during  the  entire  day,  and  the  char- 
acter of  clothing  necessary  for  comfort  is  of  course  not  as 
expensive  as  where  the  cold  is  more  intense  and  extended, 
and  certain  articles  of  food,  by  reason  of  our  open  win- 
ters, are  of  course  not  as  high  as  they  are  in  the  North." 
— W.  O.  Hart. 

"Such  a  distinction  is  fundamental  in  comparison  of 
wages,  etc.,  among  different  groups  of  recipients  and  at 
different  periods  of  time.  With  regard  to  the  problem  in 
hand,  it  justifies  the  maintenance  of  a  constant  propor- 

43 


tion  between  railway  charges  and  the  cost  of  service  as 
measured  by  wages  and  prices  paid  (under  economic  ad- 
ministration) including  interest  at  a  reasonable  rate  upon 
an  honest  capitalization." — R.  H.  Hess. 

*lt  is  important.  The  forces  bringing  about  the  rise 
of  prices  will  necessarily  lead  to  a  rise  of  railroad  rates — 
or  to  railroad  bankruptcy." — Joseph  French  Johnson. 

"It  is  of  the  utmost  importance,  because  of  the  vary- 
ing extent  and  degree  of  promptness  in  which  alterations 
in  the  relative  money  supply  affect  (i)  general  prices, 
(2)  general  wages,  (3)  the  prices  of  different  individual 
commodities  (which  together  constitute  the  general  price 
level),  (4)  the  wages  of  different  classes  of  working  men 
which  together  constitute  the  general  wage  level." — E. 
W.  Kemmerer. 

"The  distinction  is  important;  for  the  welfare  of  the 
individual  or  class  is  determined  by  his  real  wealth  and 
income,  not  his  nominal  wealth  and  income.  The  work- 
ing man  who  owns  a  $400  cottage  (cost  of  building),  is 
no  richer  because  the  assessor  values  it  for  taxation  at 
$500  if  he  cannot  sell  it  for  more  than  $400.  He  has  no 
more  to  eat  when  his  supplies  consist  of  a  barrel  of  flour 
and  a  bushel  of  potatoes  and  twenty  pounds  of  beef,  when 
he  has  to  pay  $15  for  these  supplies,  than  he  is  when  he 
gets  them  for  $10.  The  real  standard  of  living  or  con- 
sumption, in  other  words,  consists  in  the  goods  actually 
used,  and  not  in  the  money  they  cost,  which  indicates  the 
individual's  proportion  of  the  community's  goods." — 
David  Kinley. 

"The  distinction  is  important,  but  to  what  extent  it  is 
important,  I  am  unable  to  state  without  a  very  careful 
study  of  the  subject." — M.  A.  Kursheedt. 

44 


"The  distinction  is  very  important.  A  variation  in  the 
nominal  rate  may  not  alter  the  economic  welfare  of  any 
person,  but  any  change  in  the  real  rate  points  with  cer- 
tainty to  somebody's  rise  in  the  world  and  someone  else's 
setback." — Charles  H.  Leeds. 

"Certainly ;  and  its  extent  will  depend  on  the  purchas- 
ing power." — Arthur  T.  Lyman. 

"The  distinction  is  of  particular  importance  in  the  in- 
terpretation of  price  movements.  The  rise  in  prices  since 
1897,  for  instance,  has  been  'nominal'  rather  than  Veal,' 
i.  e,,  money,  as  the  measure  of  value,  has  increased  in 
volume  more  rapidly  than  have  those  commodities  and 
services  the  values  of  which  it  serves  to  measure." — Ros- 
WELL  C.  McCrea. 

"The  distinction  is  important  in  a  period  like  the  pres- 
ent, when  the  supply  of  gold  is  changing  rapidly,  though 
the  fall  of  prices,  since  the  panic  of  October,  1907,  indi- 
cates that  other  conditions  may  seriously  retard  and  even 
overcome  the  rise  of  prices  which  normally  accompanies 
an  increased  output  of  gold." — ^John  Martin. 

"It  is  important.  It  does  not  follow,  however,  that, 
because  the  gold  dollar  has  depreciated,  railway  rates 
should  be  boosted  up." — Royal  Meeker. 

"It  is  of  the  first  order  of  importance.  If  real  railroad 
rates  continue  in  the  future  progressively  to  decline 
(which  must  be  the  case  if  there  is  continued  divergence 
between  the  prices  of  what  they  buy  and  the  prices  of 
what  they  sell)  it  will  first  check  improvements  and  ulti- 
mately bankrupt  the  roads.  The  position  of  any  one  who 
sells  for  a  customary  price  is  very  difficult  under  present 
monetary  conditions,  unless  he  can  virtually  advance  his 

45 


price  by  lowering  the  quality  and  hence  the  cost  of  his 
commodity.  We  are  really  at  present  in  a  revolutionary 
economic  state,  and  the  public  mind  has  great  difficulty  in 
getting  its  bearings  through  inexperience.  This  is  but  the 
third  time,  since  modem  history  began,  when  there  has 
been  inflation  on  a  specie  basis." — Charles  W.  Mixter. 

'The  only  importance,  in  my  opinion  of  this  distinction 
lies  in  the  fact  that  with  comparative  statistical  data  be- 
fore us  of  the  three  rates  mentioned  above,  we  are  able  to 
determine  the  relative  increase  or  decrease  of  these  rates 
individually  from  year  to  year  and  comparatively  with 
each  other.  The  figures  then  speak  for  themselves,  as  to 
real  increase  or  decrease  of  wages,  prices  and  railroad 
rates,  and  their  nominal  increase  or  decrease  relatively  to 
each  other." — ^James  B.  Morman. 

"This  distinction  as  to  the  difference  between  the  nomi- 
nal and  real  railway  rate  is  of  considerable  importance  to 
the  railways,  since  the  value  of  railway  services  are,  like 
the  value  of  anything  else,  determined  by  marginal  utility 
and  not  by  cost.  Increase  in  the  cost  of  labor  and  ma- 
terials (a  decrease  in  real  rates)  does  not  necessarily 
imply  an  increase  in  the  value  of  the  transportation  ser- 
vices rendered,  and  therefore  the  railways  have  little 
economic  force  at  their  command  in  an  attempt  to  raise 
nominal  rates  as  long  as  low  real  rates  is  all  they  can 
plead  as  an  excuse.  If,  however,  a  low  real  rate  is  ac- 
companied by  an  increase  in  the  value  of  services  (higher 
marginal  utility)  the  moral  force  of  the  former  will  add 
itself  to  the  economic  force  of  the  latter.  Without  the 
economic  force  of  efficiency  of  sei;vice  rendered  for  nomi- 
nal rates  a  low  real  rate  is  to  be  economically  interpreted 
as  the  rate  of  a  'marginal  producer.'  If  competition  ex- 
ists there  is  no  help  at  hand,  but  if  not,  as  in  the  case  of 
most  railways,  then  the  existence  of  an  industry  as  well 

46 


as  that  of  the  producer  is  threatened  and  the  'principle  of 
protection'  becomes  justifiable;  that  is,  governmental  in- 
terference where  the  free  play  of  economic  law  fails  to 
^regulate/  This  of  course  would  be  the  provision  of 
means  to  enable  a  railway  to  raise  its  nominal  rate.  Some 
foreign  railways  are  obliged  to  charge  a  nominal  rate  per- 
mitting of  so  low  a  real  rate  that  expenses  eat  up  all  in- 
come, and  are  therefore  supported  by  government  aid 
(principle  of  protection)  on  account  of  the  high  social 
(uncollectible)  income  accruing  to  the  country  in  gen- 
eral. A  study  of  the  questions  involved  in  real  railway 
rates  would  to  my  mind  help  in  pointing  out  why  railways 
do  not  profit  from  'rents'  while  landlords  do." — George 

S.    MOYNAHAN. 

"As  money  is  not  in  itself  an  ultimate  economic  good, 
but  merely  the  medium  by  which  surplus  commodities  are 
commonly  exchanged  for  those  necessary  to  satisfy  eco- 
nomic wants,  the  distinctions  between  returns  for  labor 
services  or  the  use  of  property  expressed  in  mere  volume 
of  money  and  such  returns  expressed  in  the  capacity  of 
the  sums  of  money  obtained,  to  serve,  as  to  the  individuals 
receiving  them,  the  purposes  for  which  money  exists  are 
always  important.  They  are  so  important  that  any  in- 
quiry as  to  wages,  costs,  or  railway  rates, 
which  seeks  to  compare  conditions  at  dififerent  peri- 
ods of  time  or  in  different  regions  and  omits  to  take  them 
into  account  is  scientifically  incomplete  and  is  usually 
rendered  valueless  by  the  omission." — H.  T.  Newcomb. 

"The  distinction  as  applied  in  your  queries  is,  as  it 
seems  to  me,  a  misleading  one.  Rates  are  the  prices 
charged  to  a  unit  (of  weight  and  distance)  of  transporta- 
tion. The  fallacy  of  your  position  lies  in  ignoring  the 
distinction  between  Weal  and  nominal  cost  of  transporta- 

47 


Hon/     The  proper  term  analogous  to  'real  and  nominal 
wages'  is  'real  and  nominal  profits.' 

''There  is  no  reason  why  rates  should  bear  a  constant 
ratio  to  price.  Rates  of  transportation  have  had  a  con- 
stantly decreasing  ratio  to  prices  ever  since  the  time  of 
the  Stuarts,  when  it  cost  more  to  transport  goods  from 
York  to  London  than  it  does  now  to  transport  them  from 
Minnesota  to  London.  This  fact  is  a  great  advantage  to 
consumers  and  it  is  consistent  with  larger  profits  than  in 
former  years." — L.  W.  Parish. 

"If  society  were  static,  the  importance  would  be  nil; 
for  relative  conditions  would  adjust  themselves  (i.  e.,  if 
money  fell,  wages  and  prices  would  go  up,  and  vice  versa). 
But  in  shifting  conditions,  as  to-day,  the  importance  is 
considerable.  Prices  feel  the  influence  of  cheap  money 
first,  then  wages,  and  finally  such  rates  as  railroad  rates, 
which  are  subject  to  judicial  procedure,  and  are  there- 
fore slow  of  adjustment." — ^Julius  H.  Parmelee. 

"The  distinction  is  decidedly  important  and  any  fail- 
ure to  recognize  it  could  not  long  continue  as  price 
change,  resulting  from  the  economic  forces  operating, 
must  thrust  it  upon  the  attention  of  everyone,  producer 
and  consumer.  The  extent  of  its  importance  is  measured 
by  the  difference  between  economic  justice  and  injustice 
between  the  various  classes  of  producers  and  consumers, 
capitalists,  wage-earners  and  entrepreneurs." — Warren 
M.  Persons. 

"Yes.  The  underlying  meaning  of  all  contracts  to  pay 
money  changes  when  the  purchasing  power  of  money 
changes." — Carl  C.  Plehn. 

"Failure  to  take  into  account  this  distinction  may  bank- 
rupt a  road,  stop  dividends  and  thus  cause  financial  dis- 

48 


turbance ;  or,  in  case  dividends  are  continued,  needed  im- 
provements or  extensions  may  be  stopped.  We  need  im- 
provements and  we  need  extensions.  These  it  seems  to 
me  outweigh  the  disadvantage  of  a  shght  increase  in 
nominal  rates.  There  is  bound  to  be  a  disadvantage  for 
the  general  public  do  not  easily  grasp  the  importance  of 
the  above  distinction  and  as  a  consequence  prejudice  is 
sure  to  be  the  outcome  of  any  upward  movement  of  rates, 
even  though  this  movement  is  more  apparent  than  real." 
— Jesse  E.  Pope. 

"Its  importance  is  sufficiently  indicated  by  the  percent- 
ages quoted  within.'' — H.  H.  Powers. 

"It  is  very  important.'' — L.  G.  Powers. 

"There  is  such  a  distinction ;  it  is  important,  and  its  im- 
portance is  measured  by  the  extent  of  the  fluctuation  in 
the  value  of  money." — Lawson  Purdy. 

"This  distinction  is  important  but  of  no  greater  im- 
portance and  no  greater  extent  than  in  the  case  of  prices 
for  commodities  to  any  person  whose  income  is  compara^ 
lively  fixed.  If  the  railways  do  not  care  to  do  a  service 
longer  at  a  given  price,  it  is  their  privilege  to  stop  just  the 
same  as  any  day  laborer  may  stop.  To  say  that  the  pub- 
lic nature  of  the  railway  business  will  not  permit  of  a  stop 
is  only  to  play  fast  and  loose  by  one  word  for  the  public 
and  two  for  the  companies." — H.  W.  Quaintance. 

"The  real  wages,  prices  and  rates  are  the  important 
things.  Upon  them,  not  upon  nominal  wages,  prices  and 
rates,  depend  the  prosperity  and  progress  of  the  people." 
— Charles  Lee  Raper. 

"The  distinction  is  important.  Coryea  Moylan  Walsh, 
in  his  splendid  book  entitled  *The  Measurement  of  Gen- 

49 

2—4 


eral  Exchange  Value'  ventures  the  suggestion  that  gold 
may  be  found  among  the  most  variable  priced  commodi- 
ties. 

"Every  studious  speculator  in  farms,  bonds  or  stocks, 
reasons  vaguely  that  what  he  wants  back  in  a  few  years 
is  a  lump  purchasing  power,  and  so  he  attempts  to  make 
such  investments  as  will  bring  an  'unearned  increment' 
either  because  of  or  in  spite  of  changes  in  the  exchange- 
value  of  gold." — ^Walter  T.  Ray. 

"The  distinction  is  important  for  the  absolute  money 
charge  is  of  little  value  or  interest  to  the  shipper  compared 
to  the  relative.  Naturally  an  adoption  of  a  real  rate  on  a 
basis  of  charges  of  ten  years  ago  would  work  to  the  dis- 
advantage of  the  shipper  and  to  the  advantage  of  the  rail- 
road."— Gardner  Richardson. 

"The  distinction  is  so  far-reaching  that  it  is  of  the  larg- 
est public  and  private  import.  A  measure  of  its  import- 
ance is  the  difficulty  of  adjusting  nominal  rates ;  hence  it  is 
of  the  gravest  importance  for  certain  selected  classes,  eco- 
nomic groups.  These  include  wage-earners  in  most  lines 
and  localities,  and  the  producers  of  some  lines  of  com- 
modities."— Philip  A.  Robinson. 

"As  to  (c)  :  Its  importance  is  that  it  calls  attention  to 
the  necessary  relation  between  the  charges  for  the  services 
which  the  railways  render  as  a  whole  and  the  cost  of 
rendering  those  services.  Costs  have  no  doubt  risen  ma- 
terially during  the  last  ten  years — disregarding  the  down- 
ward trend  of  prices  during  the  last  nine  months  which 
will  probably  prove  temporary  only — and  this  must  be 
considered  when  the  railroads  are  criticised  for  not  lower- 
ing their  'nominal'  rates  or  even  for  advancing  them."— 
Henry  R.  Seager. 

50 


''All  or  at  least  most  business  arrangements  are  entered 
into  on  the  assumption  that  the  purchasing  power  of  the 
dollar  is  constant.  Any  considerable  increase  or  decrease 
in  the  value  of  money  seriously  disturbs  business  by  al- 
tering the  distribution  of  the  social  income.  Unless  all 
contracts  involving  the  payment  of  money  are  modified, 
as  contemplated  in  the  so-called  tabular  standard  of  value, 
an  increase  or  decrease  in  the  purchasing  power  of  money 
alters  distributions.  Some  classes  or  interests  get  more 
and  others  less  than  would  have  been  the  case  had  the 
value  of  money — its  purchasing  power — remained  con- 
stant."— J.  Allen  Smith. 

"I  have  not  sufficient  data  to  express  an  opinion  on  the 
subject  of  railway  rates." — N.  I.  Stone. 

"The  importance  rests  in  the  fact  that  the  real  test  oi 
the  economic  condition  of  a  society  is  not  to  be  found  in 
the  number  of  units  of  a  standard  of  value,  such  as 
money,  which  pass  through  the  average  person's  hand  but 
is  the  amount  of  the  necessities,  comforts  and  luxuries 
of  life  which  the  average  laborer  or  rather  citizen  secures, 
coupled  with  the  amount  of  savings  after  the  necessities 
and  comforts  are  secured." — George  S.  Sumner. 

"Yes,  very  important." — Frank  J.  Symmes. 

"Certainly  it  is  important.  The  mere  change  of  twenty- 
five  per  cent  in  the  purchasing  power  of  each  dollar, 
unless  compensated  by  an  equal  change  in  the  number  of 
dollars  you  get  for  service  rendered  is  sufficient  to  cancel 
the  profit  of  any  business  or  to  double  it, — according  to 
the  direction  of  change  in  purchasing  power  of  the  dol- 
lar."— J.  A.  TiLLINGHAST. 

"The  distinction  between  the  money  values  and  the 
commodity  values  of  goods   and   services   as   explained 

51 


above,  is  absolutely  essential  to  a  correct  analysis  of  any 
problem  involving  a  comparison  of  wages,  prices  or  rates 
in  different  periods  of  time."— Edson  Newton  Tuckey. 

''Man  cannot  eat  money.  He  must  exchange  it  for 
commodities.  Our  monetary  system  is  imperfect.  The 
multiple  system  will  be  used  five  hundred  years  from 
now." — E.  B.  Waller. 

"Yes.  (For  its  importance  in  the  case  of  prices,  see 
my  'Measurement  of  General  Exchange  Value,'  pp.  473- 

7). 

"As  for  railway  rates,  it  means  that  they  ought  to  rise 

in  proportion  to  the  rise  of  general  prices,  unless  there 

have  been  improvements  and  economies  reducing  the  costs 

(in  labor  and  material)  of  rendering  the  same  services, 

or   unless   the   rates    were    initially   too   high." — C.    M. 

Walsh. 

"Some  two  years  ago  I  stated  that,  since  a  rise  of  prices 
was  the  same  thing  as  the  depreciation  of  money,  that  if 
prices,  on  the  one  hand,  continued  to  rise,  thus  increasing 
the  cost  of  labor  and  supplies  of  all  kinds  required  by  rail- 
roads, while,  on  the  other  hand,  the  roads  were  prohibited 
from  earning  more  dollars  by  correspondingly  raising 
rates,  that  it  was  only  a  question  of  time  when  the  strong- 
est roads  would  be  forced  into  bankruptcy.  A  number 
of  the  weaker  roads  have  already  gone  that  way." — A.  J. 
Warner. 

"Utterly  unimportant,  if  true." — D.  C.  Westenhaver. 

"I  have  already  answered  this  question  in  part.  Your 
own  questionnaire  indicates  one  of  the  ways  in  which  such 
distinctions  are  of  importance.  Similar  distinction  in  the 
case  of  wages  is  important,  e,  g.,  in  tariff  discussions; 

52 


in  studies  of  social  progress ;  etc.  It  would  take  a  chapter 
to  answer  the  question  adequately." — George  Ray 
Wicker. 

"It  is  important  to  the  shipper  that  his  rate  be  as  low 
as  he  can  make  it,  just  as  it  is  important  that  his  outlay 
for  wages  or  material  or  any  other  productive  acts  be 
low.    It  is  of  no  import  to  the  carrier  as  explained  above." 

— M.  S.  WiLDMAN. 

"It  is  unquestionably,  very  important  in  any  careful  cal- 
culation of  actual  variations,  and  relative  economic  advan- 
tages. Very  few  people  make  these,  however,  with  any 
accuracy.  Neither  business  men  nor  employees  make  a 
comprehensive  and  consequently  properly  proportioned 
comparison." — A.  B.  Woodford. 

"Of  much  greater  importance  than  a  simple  change  in 
money  or  nominal  wages  and  rates.  Without  making  this 
distinction,  one's  conclusions  might  be  just  the  reverse  of 
the  true  condition." — Lester  W.  Zartman. 


53 


ANSWERS  TO  THE  THIRD  QUESTION.* 

"The  dollar  will  purchase  less  than  in  1897,  unques- 
tionably/'—T.  S.  Adams. 

"A  study  of  the  index  numbers  of  wholesale  prices  for 
the  period  specified  forces  one  to  the  conclusion  that  there 
has  been  a  depreciation  in  the  value  of  the  dollar  since 
1897." — Eugene  E.  Agger. 

"Measured  by  what  standard?" — W.   F.  Allen. 

"Most  certainly." — E.  Benjamin  Andrews. 

"Without  having  given  the  matter  careful  considera- 
tion, I  am  inclined  to  think  that  gold,  as  compared  with 
many  commodities  and  services,  has  depreciated  in  value 
due  to  the  increased  output  of  the  metal ;  also  that  many 
commodities  and  services  have  appreciated  as  compared 
with  gold,  due  to  the  stimulated  demand  for  them  in  the 
pursuit  of  profits  during  the  recent  period  of  prosperity." 
— C.  C.  Arbuthnot. 

"There  seems  to  be  no  doubt  that  it  has." — N.  T. 
Bacon. 

"The  value  of  gold,  like  that  of  other  things,  is  change- 
able. A  dollar  of  one  year  is  not  the  same  thing  as  the 
dollar  of  another  year,  except  that  in  each  case  it  is  23.22 
grains  of  gold.    As  there  is  no  standard  by  which  to  com- 


*The  third  question  was:     "Has   the   American    dollar   depre- 
ciated since  1897?" 

54 


pare  the  dollar  of  one  year  with  that  of  another  year  the 
question  cannot  be  answered  from  an  indiscriminate 
standpoint.  In  relation  to  some  things  it  has  appreciated ; 
in  relation  to  others  it  has  depreciated. 

'It  is  not  fair  to  compare  the  conditions  of  a  year  of 
stagnation  with  a  prosperous  year.  When  business  is 
booming,  each  workman,  as  a  rule,  performs  more  work 
than  when  business  is  dull,  and  if  he  gets  a  larger  number 
of  dollars  per  week,  he  may  actually  get  less  in  propor- 
tion to  the  amount  of  work  he  is  doing.  In  dull  times, 
workmen  will  always  try  to  make  their  job  last  as  long  as 
possible."— Hugo  Bilgram. 

"Depreciation  and  appreciation  are  relative  and  mean 
nothing  unless  a  standard  is  given.  There  is  no  doubt  that 
the  gold  price  of  certain  articles  has  appreciated  since 
1897  in  the  United  States.  If  these  articles  are  taken  as  a 
basis,  it  may  be  said  that  money  has  depreciated.  The 
gold  price  of  wages  per  day  has  increased  in  some  cases. 
However,  the  increase  in  efficiency  of  labor  is  such  that 
the  gold  price  per  unit  of  work  produced  has  not  in- 
creased in  all  cases.  The  fact  that  the  differences  in  gold 
prices  of  commodities  between  1897  and  1907  has  been  so 
far  from  uniform  would  argue  that  individual  apprecia- 
tion of  prices  and  wages  w^as  a  fact ;  and  not  a  general  de- 
preciation of  the  common  denominator." — John  Balch 
Blood. 

"It  undoubtedly  has  greatly  depreciated.  The  increased 
output  of  gold  proves  this." — ^James  E.  Boyle. 

"If  you  mean  by  this  the  value  of  a  unit  of  gold  as  a 
commodity,  an  affirmative  answer  does  not  necessarily 
follow.  It  is  true  that  prices  in  general  have  risen  and  in 
some  cases  very  much.  But  the  appreciation  or  deprecia- 
tion of  gold  is  only  one  factor — and  by  no  means  the  most 
important  one  in  this  phenomenon." — John  E.  Brindley. 

55 


'^Undoubtedly/'— Charles  J.   Bullock. 

''Measured  by  other  currency,  No.  Measured  by  com- 
modity values,  Yes."— Victor  S.  Clark. 

"I  think  it  has.  The  dollar  won't  buy  as  much  and  as  a 
medium  of  exchange  it  won't  do  as  much  for  its  owner." 
— J.  W.  Crook. 

"Taking  into  account  the  widening  of  demand  for 
money  as  concurrent  with  the  enlarged  demand  for  com- 
modities, which  brought  prices  to  the  level  of  1907,  it  is 
doubtful." — John  Franklin  Crowell. 

^^Yes."— R  R.  Clow. 

"I  do  not  think  its  purchasing  or  paying  quality  has 
been  uniformly  lessened.  The  prices  of  dry  goods,  and  the 
wages  of  dry  goods  clerks,  seem  to  me  to  have  remained 
about  the  same ;  this,  of  course,  does  not  exhaust  the  list. 
I  doubt  whether  the  purchasing  or  paying  power  of  the 
American  dollar  owes  its  depreciation  to  anything  except 
the  very  remarkable  industrial  activity  which  has  dis- 
tinguished the  past  ten  years  in  the  United  States,  and  to 
the  increasing  demands  of  the  members  of  the  trades 
unions  and  labor  unions.  In  some  respects  the  demands 
and  power  of  the  unions  have  encouraged  a  class  of  men 
to  neglect  their  work,  or  to  do  poor  work,  and  have  com- 
pelled railroad  companies,  among  others,  to  keep  on  their 
pay  rolls  men  they  did  not  require: — to  this  extent  the 
purchasing  power  of  the  American  dollar  seems  to  me  to 
be  affected  by  other  conditions  tjian  those  attributable  to 
industrial  activity." — Morris  M.  Corn. 

"Measured  by  prices,  yes.  The  increased  gold  supply 
has  no  more  than  kept  pace  with  the  increased  demands 

^6 


made  upon  it.  The  purchasing  power  of  a  dollar,  is,  in 
my  opinion,  at  least,  ten  per  cent  less  to-day  than  in  1897. 
This  is  certainly  true  as  regards  the  necessaries  of  life." — 
F.  S.  Crum. 

''Undoubtedly/' — John  Cummings. 

"Undoubtedly."— W.  M.  Daniels. 

"Unquestionably." — H.  T.  Davenport. 

"Yes."— Davis  R.  Dewey. 

"There  is  no  doubt  about  this.  The  purchasing  power 
of  a  dollar  is  less  than  it  was  in  1897.  How  much  less  is 
a  question  on  which  the  authorities  do  not  agree,  but  that 
does  not  matter  so  far  as  the  theoretical  basis  of  your  ar- 
gument is  concerned." — Carroll  W.  Doten. 

"The  American  dollar  has  unquestionably  depreciated 
during  the  past  decade  (1897-1907).  A  rise  of  prices  is 
the  same  thing  as  a  money  depreciation.  What  the  causes 
of  this  depreciation  in  the  United  States  are  is  not  easy  to 
state,  as  in  this  country  the  question  is  complicated  by 
tariffs,  etc.  Sauerbeck's  index  numbers  in  Great  Britain 
would,  in  my  opinion,  give  us  a  truer  measure  of  the 
amount  of  the  depreciation.  A  fair  estimate  would,  I  be- 
lieve, be  thirty  per  cent  and  this  is  due  mainly  to  the  in- 
creased supply  of  gold." — Garrett  Droppers. 

"Yes.  I  do  not  know  of  any  authority  who  denies  the 
fact."— C.  F.  Emerick. 

"The  prices  of  many  commodities  have  increased.  It  is 
difficult  to  estimate  the  depreciation  of  the  dollar." — A. 
B.  Fairchild. 

57 


"There  can  be  no  doubt  that  the  American  dollar  has 
depreciated  to  a  considerable  extent  since  1897."— Fred 
R.  Fairchild. 

"Yes/'— Irving  Fisher. 

"Unquestionably.  That  is,  the  purchasing  power  in 
terms  of  general  commodities  has  fallen." — Willard  C. 
Fisher. 

"Yes.''— J.  D.  Forrest. 

"Yes." — A.  G.  Fradenburgh. 

"Undoubtedly." — George  P.  Garrison. 

"Undoubtedly." — David  I.  Green. 

"I  believe  so.  But  I  think  the  index  numbers  of  the 
'Economist'  shows  an  appreciation  during  the  past  year.'" 
Lewis  H.  Haney. 

"That  the  Am.erican  dollar  has  deteriorated  since 
1897,  is  apparent  to  all  who  have  given  even  the  most 
cursory  study  to  the  production  of  gold  since  that  time. 
A  few  years  ago  the  late  Mr.  Walter  S.  Logan,  an  emi- 
nent member  of  the  New  York  Bar,  wrote  a  most  in- 
structive and  exhaustive  article  on  this  subject.  I  en- 
dorse all  that  he  said  then,  and  time  has  justified  his  con- 
clusions. The  best  answer  that  can  be  made  to  this 
question  is  his  article  which  I  have  no  doubt  you  can 
easily  procure." — ^W.  O.  Hart. 

"Yes."— R.  H.  Hess. 

"Yes.  About  thirty  per  cent." — Joseph  French 
Johnson. 

58 


"It  did  decidedly  from  1897  to  October,  1907,  although 
there  has  been  a  movement  in  the  other  direction  since 
that  time." — E.  W.  Kemmerer. 

"In  my  opinion  the  purchasing  power  of  a  dollar  has 
depreciated  about  forty  per  cent  since  1897,  as  indicated 
by  the  increase,  in  the  price  of  goods  since  that  time." — 
David  Kinley. 

"Undoubtedly,  yes." — M.  A.  Kursheedt. 

"Yes." — Charles  H.  Leeds. 

"Beyond  question  gold  has  depreciated  since  1897  ap- 
proximately forty  per  cent." — W.  H.  Lough,  Jr. 

"Perhaps  so — but  other  causes  have  probably  largely 
neutralized  the  effect,  for  the  time  at  least. 

"The  tremendous  business  activity  and  development  in 
this  country  caused  such  a  demand  for  labor  and  pro- 
ducts that  wages  and  prices  advanced  rapidly  and  largely 
at  least  with  little  reference  to  depreciation  of  gold.  The 
rough  and  reckless  actions  of  the  Administration  at 
Washington  brought  on  a  panic  which  might  probably 
have  been  avoided  by  sane  and  reasonable  action  though 
development  and  extravagance  were  so  far  outrunning 
capital  and  income  as  to  make  it  certain  that  there  must 
be  a  curtailment. 

"Prices  of  goods  have  fallen  heavily  (not  owing  to 
appreciation  of  gold,  of  course)  but  labor  w^ages  have  not 
generally  fallen  in  at  all  the  same  ratio.  So  in  fact  and 
partly  in  consequence  many  men  are  out  of  work  .  Rail- 
road gross  and  net  receipts  have  been  greatly  reduced, 
without  reduced  wages  or  advanced  freight  rates." — 
Arthur  T.  Lyman. 

59 


"Yes.''— RoswELL  C.  McCrea. 

"It  depreciated  from  1897  to  1907.  Since  October, 
1907,  it  has  been  slightly  appreciating." — ^John  Martin. 

"Yes,  undoubtedly."— Royal  Meeker. 

"Yes,  undoubtedly." — Charles  W.  Mixter. 

"No.  The  purchasing  power  of  the  dollar  has  de- 
creased, but  this  is  not  'depreciation.'  The  purchasing 
power  of  the  dollar  has  decreased  because  the  wages, 
prices  of  commodities,  railroad  rates,  etc.  have  in- 
creased. The  value  of  the  dollar  is  the  same  and  will  re- 
main the  same  because  it  has  been  established  as  a  stand- 
ard with  which  to  measure  other  prices.  Money  is  not 
a  commodity.  To  treat  it  as  a  commodity  has  been,  in 
my  opinion,  the  great  blunder  of  many  economists.  It 
is  a  social  force  created  by  society  to  do  social  work,  and 
as  'money'  is  beyond  the  conditions  which  affect  the  rise 
and  fall  in  prices  of  commodities,  wages,  etc.  (But  this 
is  too  important  a  subject  to  be  discussed  in  a  mere  note. 
It  is  worthy  of  careful  elaboration  and  conscientious  dis- 
cussion, and  in  my  opinion,  when  its  real  significance  is 
fully  grasped  will  help  economists  to  get  together  on 
practical  grounds  for  the  solution  of  some  of  the  great 
economic  and  social  questions  which  now  confront  us.)" 
— ^James  B.  Morman. 

"The  American  dollar  has  without  doubt  depreciated 
in  value  since  1897.  This  seems  to  be  a  consequence  of 
the  increase  in  the  world's  supply  of  gold  which  began 
about  1892  and  has  since  continued,  while  the  period  of 
falling  prices  reached  the  critical  point  in  1897,  when 
prices  followed  the  upward  course  in,  as  it  were,  sympa- 
thy with  the  gold  supply.    Certain  variations  in  the  prices 

60 


X.'. .  :}y^ 


of  protected  commodities  should  of  course  be  discounted 
in  an  argument  based  on  these  facts." — George  S.  Moy- 

NAHAN. 

*^Yes."— H.  T.  Newcomb. 

"Granted  that  the  American  dollar  has  depreciated  in 
purchasing  power  since  1897." — L.  W.  Parish. 

"Yes." — Julius  H.  Parmelee. 

"The  statistics  that  you  have  cited  demonstrate  that  the 
dollar  has  depreciated.  Gold  is  undoubtedly  cheaper.  In 
1897,  Bryan,  thinking  that  the  annual  gold  production 
would  be  a  decreasing  rather  than  an  increasing  addition 
to  the  world's  store,  advocated  the  free  coinage  of  silver 
in  order  to  increase  the  amount  of  the  circulating  me- 
dium and  put  a  stop  to  the  falling  prices.  The  circulat- 
ing medium  has  increased  from  twenty-one  dollars  per 
capita  in  1896  to  thirty-five  dollars  per  capita,  in  1908,  but 
by  the  addition  of  gold  and  not  silver." — Warren  M. 
Persons. 

"Yes."— Carl  C.  Plehn. 

"I  believe  it  has." — Jesse  E.  Pope. 

"Beyond  a  doubt."— H.  H.  Powers. 

"I  believe  it  has." — L.  G.  Powers. 

"Yes." — Lawson  Purby. 

"As  the  standard  of  value,  it  is  an  insult  to  ordinary 
intelligence  to  suggest  that  the  dollar  could  depreciate." — 
H.  W.  Quaintance. 

61 


"In  terms  of  wages,  prices  and  rates,  the  American 
dollar  has  unmistakably  depreciated  since  1897." — 
Charles  Lee  Raper. 

"I  think  the  fact  is  undisputed  by  the  well-informed. 
Personally  I  am  inclined  to  think  that  money  exchange 
value  depreciates  faster  than  the  gold  supply  increases, 
because  only  part  of  the  gold  goes  into  money  or  bank 
vaults,  and  the  rest  into  the  arts;  and  also  because  gold 
serves  as  a  basis  for  a  huge  credit  structure,  which  for 
psychological  reasons  builds  up  even  faster  than  its  gold 
base,  and  periodically  gets  top-heavy,  but  in  the  nature  of 
things  never  shrinks  back  to  its  old  proportions/' — 
Walter  T.  Ray. 

"It  seems  to  me  there  is  no  reasonable  doubt  it  has, 
and  that  any  one  who  claims  it  has  not  depreciated,  de- 
fends an  untenable  position." — Gardner  Richardson. 

"It  appears  so,  from  the  great  mass  of  current  prices. 
I  take  this  depreciation  to  be  strictly  a  mercantile  one, 
and  do  not  believe  there  has  occurred  in  the  interval  men- 
tioned a  sensible  depreciation  of  money  from  either  pro- 
duction of  money  (metal)  or  issuance  of  currency. 
Therefore,  the  price  effects  are  more  various  and  com- 
plex. They  may  be  quite  as  fictitious  as  if  caused  by 
currency  manipulation,  but  they  seem  to  have  more  points 
of  origin." — Ppiilip  A.  Robinson. 

"Yes;  the  index  number  you  quote  from  the  Bulletin 
of  Labor  indicates,  in  my  opinion  with  a  fair  degree  of 
accuracy,  the  extent  of  the  depreciation." — Henry  R. 
Seager. 

"That  it  has,  seems  to  me  evident." — ^J.  Allen  Smith. 

62 


"The  purchasing  power  of  the  dollar  has  undoubtedly 
been  impaired." — N.  I.  Stone. 

*'Yes." — George  S.  Sumner. 

"Yes.'' — Frank  J.  Symmes. 

"I  think  no  intelligent  observer  of  our  time  can  doubt 

this." — ^J.    A.    TiLLINGHAST. 

"Yes,  but  it  had  appreciated  for  a  considerable  time 
prior  to  1897." — Edson  Newton  Tuckey. 

"Yes."— E.  B.  Waller. 

"Yes."— C.  M.  Walsh. 

"It  evidently  has.  Index  numbers  kept  by  the  London 
Economist  show  a  rise  of  prices  of  thirty  per  cent  between 
1896  and  1907,  in  England.  Our  records  indicate  a  some- 
what! greater  rise  in  prices,  or  from  thirty-three  to  forty 
per  cent.  But  this  change  in  prices  is  not  all  due  to  the 
increase  in  the  production  of  gold ;  part  of  it  is  due  to  the 
large  additions  of  paper  money  to  the  gold." — A.  J.  War- 
ner. 

"No  one  knows.  If  it  has,  the  quantitative  theory  of 
money  preached  by  the  free  silverites  in  1896  is  estab- 
lished. Then,  I  thought  I  had  convinced  myself  that  this 
theory  was  not  the  controlling  factor  in  the  matter  of 
prices;  I  am  now  half  persuaded  that  I  was  wrong." — 
D.  C.  Westenhaver. 

"The  American  dollar  consists  of  23.22  grains  of  fine 
gold.  Apparently  this  amount  of  fine  gold  will  buy  a  less 
amount  of  the  commodities  of  life  than  it  would  in  1897. 

63 


If  that  is  the  fact  and  if  it  is  due  to  the  increased  output 
of  the  metal,  it  may  be  fairly  said  that  the  dollar  has  de- 
preciated."— Horace  White. 

"I  am  unhesitatingly  of  the  opinion  that  it  has  so  de- 
preciated and  that  a  prominent,  probably  the  chief,  cause 
has  been  the  unprecedented  increase  in  gold  production. 
It  is  for  this  reason  that  I  regard  the  eastern  attack  on 
Bryan  for  dropping  free  silver  as  caused  either  by  ignor- 
ance or  dishonesty.  (I  am  not  for  sixteen  to  one,  by  in- 
dependent action  of  the  United  States.)" — George  Ray 
Wicker. 

"It  is  just  as  much  depreciated  as  the  level  of  general 
prices  is  higher.  The  rise  and  fall  in  the  value  of  a  dol- 
lar has  no  meaning  except  as  reflected  in  purchasing 
power.  Your  own  statistics  show  that  this  purchasing 
power  has  declined." — M.  S.  Wildman. 

"I  doubt  very  much  if  there  has  been  any  very  large 
depreciation,  the  increased  supply  having  been  quite  fully 
taken  up  by  the  increased  demand,  and  the  cost  of  the 
production  on  the  margin  not  having  greatly  varied.  The 
statistics  needed  to  determine  this  are  not  price  varia- 
tion, even  in  index  numbers,  but  the  unobtainable  figures 
of  cost  to  a  number  of  mining  companies." — A.  B.  Wood- 
ford. 

"Beyond  a  doubt." — Lester  W.  Zartman. 


64 


ANSWERS    TO    THE    FOURTH    QUESTION.* 

*'lt  is,  even  theoretically,  impossible  to  state  this  change 
in  any  simple  average  or  single  figure.  (The  reasons  for 
this  statement  are  abstruse  and  may  be  found  in  an  article 
by  the  writer  in  the  Journal  of  Political  Economy  for,  I 
think,  December,  1901  and  March,  1902).  The  index 
numbers  of  the  Bureau  of  Labor,  however,  are  carefully 
prepared  and  tell  the  truth  in  a  rough  way." — T.  S. 
Adams. 

"This  is  too  difficult  to  estimate  with  any  degree  of  sat- 
isfaction.''— Eugene  E.  Agger. 

"Approximately  thirty  per  cent." — E.  Benjamin  An- 
drews. 

"I  am  unable  to  make  more  than  a  guess  at  the  per- 
centage lost,  and  beg  to  be  excused." — C.  C.  Arbuthnot. 

"1897  is  a  bad  year  to  adopt  as  a  basis  of  compari- 
son, for  the  dollar  then  had  an  abnormal  value,  as  this 
was  in  the  worst  of  the  depression  following  1893.  Our 
panic  last  fall  was  sharper  than  that  of  1893  in  its  ef- 
fect on  stock  exchange  values,  but  the  depression  follow- 
ing does  not  seem  to  be  anything  like  so  severe.  More- 
over, the  prices  for  1907,  (the  last  given)  were  practic- 
ally tmaffected  as  the  panic  came  so  late  in  the  year  that 
little  business  was  done  after  it.     I  am  inclined  to  esti- 


*The  fourth  question  was:  "If  the  American  dollar  has  de- 
preciated since  1897,  approximately  what  percentage  of  its  value 
in  that  year  has  it  lost?"  It  should  be  observed  that  in  many 
cases  the  answers  to  the  third  question  also  answer  this  one. 

65 

2— s 


mate  the  depression  at  between  ten  per  cent  and  twenty 
per  cent  and  probably  nearer  twenty  per  cent  in  ten  years, 
say  two  per  cent  per  annum,  which  is  less  than  twenty 
per  cent  in  ten  years." — N.  T.  Bacon. 

"A  basis  must  be  given  to  figure  such  a  reply.  It  is,  of 
course,  possible  for  the  exchange  value  of  gold  and  Ameri- 
can money  to  remain  absolutely  the  same  and  yet  have 
practically  all  American  commodities  increase  in  price. 
In  such  case  the  average  appreciation  of  all  commodities 
might  be  considered  as  a  depreciation  of  the  common  de- 
nominator. The  variation  in  the  difference  is  so  large 
that  each  item  must  be  considered  in  itself." — ^John 
Balch  Blood. 

"This  is  largely  a  matter  of  speculation  with  me,  but  I 
would  say  from  thirty  to  forty  per  cent." — James  E. 
Boyle. 

"It  has  lost  about  one-third  of  its  purchasing  power." — 
Charles  J.  Bullock. 

"Not  qualified  to  say  without  more  study  than  I  can 
give  the  question  at  present." — Victor  S.  Clark. 

"That  is  a  question  for  the  expert  statistician.  Only 
such  investigations  as  Jevons  undertook  could  tell.  A 
rough  guess  would  be  a  minimum  of  twenty  per  cent." — ^J. 
W.  Crook. 

"No  exact  measure  possible.  About  twenty  or  thirty 
per  cent." — F.  R.  Clow. 

"Shbuld  say  not  less  than  ten  per  cent."— F.  S.  Crum. 

"Its  depreciation  is  measured  by  the  rise  in  prices." — 
John  Cummings. 

66 


"Here  again  an  involved  statistical  investigation  is  nec- 
essary. Not  only  index  numbers  in  this  country,  but 
abroad  must  be  compared.  Two  things  are  very  impor- 
tant to  remember,  however:  (i)  that  only  a  part  of  the 
more  copious  gold  output  of  recent  years  has  gone  into 
addition  to  the  world's  coin  stock, — the  rest  being  con- 
sumed in  the  arts:  (2)  some  considerable  part  of  the  rise 
in  general  prices  in  the  United  States  since  1897  has  been 
due  to  an  expansion  of  credit  in  excess  of  even  increased 
reserves  of  gold  coin.  Without  investigation  too  long  to 
enter  upon  at  present,  I  am  not  prepared  to  say  that  the 
depreciation  in  the  gold  dollar  has  been  more  than  one  per 
cent  a  year  since  1897.  It  may  have  been  more,  but 
hardly  less." — W.  M.  Daniels. 

"Should  estimate  it  at  something  like  twenty  per  cent." 
— H.  T.  Davenport. 

"Authorities  differ,  but  all  the  index  numbers  show  a 
rise  in  prices." — Davis  R.  Dewey. 

"I  have  not  the  time  to  look  this  matter  up,  but  sev- 
eral sets  of  index  numbers  are  available  which  would 
render  it  possible  to  arrive  at  an  approximate  estimate." 
— Carroll  W.  Doten. 

"The  several  index  numbers  used  in  this  connection 
are  not  at  hand.  They  differ  somewhat  as  to  the  extent 
to  which  gold  has  depreciated,  but  I  think  they  agree  as 
to  the  general  fact." — C.  F.  Emericb:. 

"Do  not  know." — A.  B.  Fairchild. 

"An  exact  answer  to  this  question  is,  of  course,  impos- 
sible. I  am  unable  to  give  an  approximate  answer  with- 
out devoting  more  time  to  the  study  than  I  am  able  to  do 

67 


at  present.  The  correct  way  to  answer  this  question  is  by  a 
study  of  index  numbers  which  show  the  change  in  price 
level.  The  value  of  money  varies  inversely  as  the  value 
of  other  things,  that  is,  the  price  level.  The  best  index 
numbers  to  make  use  of  are  the  following: — London 
Economist,  Palgrave,  Soetbeer,  Sauerbeck,  Falkner,  Com- 
mons, Dunn,  and  the  United  States  Labor  Bureau.  In 
Johnson's  'Money  and  Currency'  you  will  find  an  interest- 
ing table,  illustrating  some  of  these  index  numbers,  at 
page  112,  and  a  discussion  at  page  214.  The  result  of  these 
index  numbers  will  vary;  each  index  number  giving  a 
different  result.  They  are  rough  approximations  only, 
but  should  be  exact  enough  for  your  purposes." — Fred 
R.  Fairchild. 

"Thirty  per  cent." — Irving  Fisher. 

"I  am  a  long  way  from  my  books  which  contain  the 
various  tables  of  general  prices.  It  is  a  matter  of  easy 
arithmetical  computation.  The  percentages  will,  of 
course,  be  somewhat  different  according  as  we  use  one  or 
another  of  the  several  accepted  tables." — Willard  C 
Fisher. 

"The  fact  of  depreciation  is  easily  established  but  the 
exact  measurement  of  the  depreciation  is  not  so  easily 
reached.  I  do  not  believe  that  any  of  the  statistical  meth- 
ods employed  are  entirely  adequate  for  this  purpose." — 
J.  D.  Forrest. 

"I  could  not  state  exactly  the  depreciation.  I  should 
say  ^bout  thirty  per  cent." — ^A.  G.  Fradenburgh. 

'T  am  not  prepared  to  give  the  statistics.  Can  you  not 
rely  on  the  figures  you  quote  from  Bulletin  75  of  the 

68 


United  States  Bureau  of  Labor?  The  percentage  of  de- 
preciation can  be  easily  deduced  from  these." — George 
P.  Garrison. 

''About  thirty  per  cent/'— R.  H.  Hess. 

'This  question  is  very  difficult  for  me  to  answer,  par- 
tially for  reasons  given  in  answer  to  question  No.  2." — 
W.  O.  Hart. 

"Prices  rose  forty-four  per  cent.  Dollar  declined  in 
proportion  of  144  to  100  or  as  100  to  70 — thirty  per  cent 
decline  on  dollar's  purchasing  power." — ^Joseph  French 
Johnson. 

"The  Bureau  of  Labor's  Index  figure  for  the  prices  of 
all  commodities  indexed  in  1897  was  89.7,  in  1907,  it 
was  129.5.  This  represents  an  increase  in  the  general 
price  level  of  the  various  commodities  included  in  Bu- 
reau's table  of  forty-four  per  cent,  or  a  decline  in  the  pur- 
chasing power  of  money  of  thirty-two  per  cent.  It 
should  be  noted,  however,  that  this  is  a  comparison  of  ex- 
tremes, 1897  being  the  year  of  lowest  prices  in  recent 
years  and  1907  the  year  of  highest  prices.  The  London 
Economisfs  index  figures  show  a  decline  in  English 
prices  of  seventeen  per  cent  from  June  i,  1907,  to  Sep- 
tember I,  1908.  The  Bureau  of  Labor's  index  figures  for 
September,  1908,  are  not  available,  but  in  view  of  the  de- 
pression in  the  United  States  it  is  reasonable  to  expect  a 
decline  in  the  United  States  as  great  or  greater  than  that 
of  England." — E.  W.  Kemmerer. 

"It  is  difficult  to  state  the  percentage,  but  it  seems  to 
me  that  the  dollar  has  depreciated  thirty-five  per  cent." — 
M.  A.  Kursheedt. 

69 


''Roughly,  thirty-three  and  one-tihird  per  cent  and  it  is 
useless  to  attempt  anything  beyond  a  rough  calculation." 
— Charles  H.  Leeds. 

"Roughly  speaking,  forty  per  cent." — Roswell  C. 
McCrea. 

"As  shown  by  the  index  numbers  for  'all  commodities' 
it  has  (approximately)  depreciated  in  the  ratio  of  90  to 
130.  Ninety  gold  dollars  in  1897  would  purchase  as 
much  as  one  hundred  and  thirty  gold  dollars  would  pur- 
chase in  1907,  a  diminution  in  value  of  44.44  per  cent. 

"But  in  1908  the  gold  dollar  has  appreciated." — John 
Martin. 

"Impossible  to  say  accurately.  Twenty-five  to  fifty  per 
cent  according  to  locahty,  would  measure  about  the  rise 
in  prices  of  most  staple  commodities,  corresponding  to  a 
fall  in  the  value  of  gold  from  twenty  per  cent  to  thirty- 
three  and  one-third  per  cent." — Royal  Meeker. 

"We  have  no  means  of  knowing  the  quantitative  result 
other  than  by  index  numbers.  Probably  they  are  suffi- 
ciently correct." — Charles  W.  Mixter. 

"The  loss  of  value  in  the  American  dollar  may  be 
viewed  from  the  normal  and  real  points  of  distinction  in 
the  manner  suggested  in  the  first  question.  The  normal 
loss,  based  on  its  general  exchange  value,  irrespective  of 
its  possessor,  is  perhaps  approximately  forty  per  cent 
from  all  causes,  amongst  which  I  believe,  we  should  in- 
clude that  arising  from  the  tariiJ  when  the  American 
(United  States)  dollar  is  specified." — George  S.  Moy- 
nahan. 

"The  index  numbers  of  the  Bureau  of  Labor  for  1897 
and  1907  were  89.7  and  129.5  respectively.     This  would 

70 


indicate  an  increase  of  44.37  per  cent  in  prices  which  is 
equivalent  to  a  depreciation  of  standard  money  of  30.73 
per  cent.  These  'index  numbers'  do  not  represent,  how- 
ever, all  the  expenditures  entering  into  the  average  family 
budget.  It  is  safe,  however,  to  say  that  the  depreciation 
is  not  less  than  twenty-five  per  cent." — H.  T.  Newcomb. 

"Granted  that  it  has  depreciated  twenty-five  per  cent." 
L.  W.  Parish. 

"It  is  hard  to  say,  and  I  would  not  venture  a  statement. 
Probably  fifteen  or  twenty  per  cent,  at  the  least." — 
Julius  H.  Parmelee. 

"It  is  largely  due  to  this  great  addition  to  our  circu- 
lating medium  that  prices  have  risen  twenty-five  to  fifty 
per  cent  since  1897." — Warren  M.  Persons. 

"The  several  published  index  numbers  are  attempts  to 
answer  this  question  literally. 

"To  answer  the  spirit  of  the  question  in  percentage 
form  is  hardly  possible.  The  effect  of  industrial  depres- 
sions and  of  periods  of  prosperity  on  prices  account  for 
the  extreme  fluctuations.  Nobody  has  the  wisdom  en- 
abling him  to  separate  the  changes  due  to  the  money 
changes  alone  from  those  due  to  other  causes." — Carl  C. 
Plehn. 

"I  am  unable  to  give  you  an  accurate  answer." — Jesse 
E.  Pope. 

"Depends  on  your  conception  of  the  true  standard  of 
value,  a  much  controverted  point.  At  least  twenty  per 
cent."— H.  H.  Powers. 

"I  would  not  wish  to  answer  this  question  with  any 
great  assurance  of  definiteness,  but  as  near  as  I  can  de- 

71 


teniiine,  it  has,  not  less  than  ten  and  possibly  more  of  a 
percentage.'' — L.  G.  Powers. 

'1  believe  authorities  differ  as  to  the  extent  of  the  de- 
preciation of  the  American  dollar  since  1897,  but  are 
agreed  that  that  depreciation  has  been  over  twenty-five 
per  cent." — Lawson  Purdy. 

"I  am  inclined  to  think  that  its  depreciation  since  1897 
has  been  near  ten  to  fifteen  per  cent." — Charles  Lee 
Raper. 

'Terhaps  even  forty  per  cent." — ^Walter  T.  Ray. 

"This  is  a  difficult  question  to  answer,  and  one  on 
which  opinions  and  even  conclusions  based  on  figures 
would  widely  differ.  A  fair  estimate  would  be  that  a  dol- 
lar has  one-third  less  purchasing  power  now  than  in 
1897." — Gardner  Richardson. 

"I  am  not  in  a  position  to  give  a  well-qualified  opinion. 
I  believe,  however,  there  is  a  disposition  to  overrate  the 
percentage  of  loss.  My  conjecture  would  be  that,  for  the 
broadest  price  level  our  dollar  has  shrunk  some  twelve 
to  fifteen  per  cent,  possibly  a  little  more  than  fifteen  per 
cent. 

''Caution:  Statistical  estimates  of  such  a  change,  ap- 
plied generally,  should  not  be  made,  not  interpreted  with- 
out carefully  weighing  the  item  selected." — Philip  A. 
Robinson. 

"Price  level  1907,     129.5 
"Price  level  1897,       89.7 


"Rise  in  price  level  39.8  which  is  forty-four  per  cent 
of  89.7,  therefore  prices   rose   forty-four  per  cent.     If 

72 


I^rices  rose  forty- four  per  cent  it  required  $1.44  to  pur- 
chase in  1907  what  one  dollar  would  purchase  in  1897, 
that  is,  one  dollar  would  purchase  only  100-144  times  100, 
or  sixty-nine  per  cent  of  what  it  would  befote,  therefore, 
the  dollar  depreciated  thirty-one  per  cent, — say  thirty  per 
cent." — Henry  R.  Seager. 

"I  would  not  attempt  to  say  how  much  general  prices 
have  risen  since  1897,  but  if  we  could  find  a  list  of  com- 
modities whose  price  changes  are  fairly  representative 
of  the  changes  in  the  prices  of  goods  generally  since  that 
date,  the  average  increase  in  the  prices  of  these  selected 
commodities  would  indicate  the  extent  of  depreciation  in 
the  dollar  since  1897." — ^J.  Allen  Smith. 

"For  approximate  estimates  see  publications  of  the  Bu- 
reau of  Labor/' — N.  I.  Stone. 

"It  is  impossible  for  me  to  say  without  far  more  study 
than  I  have  given  the  matter/' — George  S.  Sumner. 

"The  percentage  of  value  lost  in  the  depreciation  of  the 
dollar  since  1897  is  in  proportion  to  the  excess  of  money 
now  in  use  over  the  amount  in  use  at  that  time ; — elimi- 
nating from  the  consideration  in  both  cases  money  on 
storage  in  mints  and  treasuries  and  held  only  for  emer- 
gency use,  such  dollars  on  storage  being  more  available 
for  use  in  an  emergency,  but  otherwise  having  no  influ- 
ence on  nominal  or  real  values  of  any  kind.  An  ad- 
vance in  the  price  of  commodities  may  be  caused  by  many 
reasons  and  may  be  oftentimes  the  cause  rather  than  the 
effect  of  a  change  in  the  value  of  the  money  standard." — 
Frank  J.  Symmes. 

"As  to  the  amount  of  depreciation  I  have  made  no  such 
study  as  would  justify  the  expression  on  my  part  of  a  defi- 

73 


nite  estimate.  But  it  is  my  conviction,  from  such  study 
as  I  have  been  able  to  make  of  that  question,  that  the  dol- 
lar of  to-day  does  not  purchase  more  on  the  average  than 
seventy-five  cents  would  ten  years  ago.  I  feel  sure  the 
American  dollar  has  lost  at  least  twenty-five  to  thirty- 
three  per  cent  of  its  purchasing  power." — J.  A.  Tilling- 

HAST. 

"Tables  of  index  numbers  of  prices  are  supposed  to  in- 
dicate variations  in  the  purchasing  power  of  the  standard 
value, — at  least  in  terms  of  the  commodities  concerned. 
Tliose  given  by  the  Department  of  Commerce  and  Labor 
show  that  the  index  number  of  prices  advanced  nearly 
forty- four  per  cent  during  the  decade  from  1897  to  1907. 
It  should  not  be  assumed,  however,  that  prices  are  that 
much  higher  than  the  average  for  the  past  several  de- 
cades. Eleven  years  ago  prices  were  much  lower  than  in 
previous  years  and  very  much  lower  than  the  average  for 
the  last  half  of  the  nineteenth  century." — Edson  Newton 

TUCKEY. 

"About  twenty  per  cent." — E.  B.  Waller. 

"The  answer  can  only  be  rough,  because  of  the  defec- 
tive collection  not  so  much  of  prices  as  of  quantities  and 
the  incorrect  methods  employed  in  averaging  them. 

"But  if  the  Labor  Bureau's  figures  be  accepted,  they 
indicate  a  depreciation  of  the  American  dollar  between 
1897  and  1907  equal  to  the  inverse  of  the  rise  of  the  in- 
dex figures,  89.7-i29.s=.693,  by  30.7  per  cent  But  the 
Sauerbeck  figures  for  English  money,  show  only  a  rise  of 
general  prices  from  62  in  1897  to  80  in  1907,  which  means 
a  depreciation  from  i.oo  to  62-8o=.77S,  by  22.5  per  cent. 
The  English  depreciation  need  not  tally  with  the  Ameri- 
can, but  the  divergence  is  not  likely  to  have  been  so  large, 
and  part  of  it  must  be  due  to  error  in  either  or  in  both  of 

74 


the  computations.  If  we  put  the  American  depreciation  at 
twenty-five  per  cent,  we  should  probably  be  well  above 
the  truth.  Now  corresponds  to  a  rise  of  general  prices 
by  thirty-three  and  one-third  per  cent." — C.  M.  Walsh. 

"This  can  only  be  told  by  a  careful  comparison  of 
prices  in  this  and  other  gold  standard  countries  during 
the  year  and  a  study  of  changes  in  monetary  conditions  in 
the  different  countries  due  to  additions  of  paper  money  ; 
for  it  is  well  established  that  the  issue  of  paper  money  in 
any  one  of  the  gold  standard  countries,  by  forcing  out 
some  part  of  its  gold,  may  affect  the  value  of  the  cur- 
rencies of  other  gold  standard  countries  and  prices  in  all 
such  countries. 

"In  support  of  this  principle  I  refer  to  the  first  Bullion 
Report  of  1810  and  the  writings  of  Ricardo,  Lord  Over- 
stone,  Mill  and  others." — A.  J.  Warner. 

"So  many  factors  enter  in  the  problem  of  prices  that 
even  if  the  gold  production  has  contributed,  this  ques- 
tion could  only  be  guessed  at.  Personally  I  think  the  gold 
production  so  far  has  been  only  a  factor  in  the  recent 
business  stimulation,  and  not  the  whole  or  even  the  larger 
part  of  the  cause.  Economists  were  almost  a  unit,  in 
1896,  that  the  declining  prices  could  be  explained  without 
reference  to  the  stationary  gold  production  and  the  de- 
monetization of  silver.  We  had  more  evidence  and  a 
longer  period  of  observation  then  than  now." — D.  C. 
Westenhaver. 

'TDon't  know." — Horace  White. 

"Average  prices  have  quite  certainly  advanced  not  less 
than  twenty-five  per  cent  or  more  than  fifty  per  cent  since 
July,  1897.  To  answer  your  question  directly,  therefore, 
I  should  say  that  the  American  dollar  has  depreciated, 

75 


since  1897,  to  the  extent  of  thirty-three  and  one-third  per 
cent  to  twenty  per  cent  of  its  then  value.  As  I  understand 
it,  the  two  sentences  above  carry  the  same  mathematical 
meaning." — George  Ray  Wicker. 

"I  know  of  no  more  reliable  data  on  which  to  make  a 
reply  than  the  statistics  you  have  quoted.  It  is, a  problem 
of  averages  purely." — M.  S.  Wildman. 

*'On  the  basis  of  figures  you  have  given  it  is  135-110 
for  railroads,  as  indicated  under  question  seven  on  page 
four." — A.  B.  Woodford. 

"Best  indication  of  the  depreciation  that  we  have  is  the 
index  numbers  prepared  by  the  Government  and  by  vari- 
ous publications." — Lester  W.  Zartman. 


70 


ANSWERS  TO  THE  FIFTH  QUESTION.* 

"I  cannot  answer." — T.  S.  Adams. 

"The  obvious  conclusion  is  that  wherever  prices  have 
not  been  adjusted  to  the  depreciated  dollar  there  has  been 
a  real  decline  in  such  prices." — Eugene  E.  Agger. 

"In  nearly  all  cases  where  prices  and  wages  have  been 
advanced  in  terms  of  dollars  and  cents  the  advance  has 
been  nominal  only."-— E.  Benjamin  Andrews. 

"Wages  and  prices  that  nominally  remain  as  before, 
are  in  fact  lower  when  they  are  considered  in  relation  to 
the  general  well-being." — C.  C.  Arbuthnot. 

"The  adjustment  of  wages  generally  goes  on  more 
slowly  than  that  of  commodities  but  as  the  last  move  of 
commodities  was  down,  after  a  long  rise,  probably  the 
adjustment  just  now  is  more  advantageous  per  diem 
than  usual  for  those  working,  but  they  are  doing  so  much 
better  work  than  in  the  don't  care  atmosphere  of  a  year 
ago  that  per  service  rendered,  they  are  probably  not  re- 
ceiving more  than  then  in  purchasing  power  and  perhaps 
not  as  much." — N.  T.  Bacon. 

"Competition  is  not  free.  The  Government,  in  con- 
trolling the  production  of  the  medium  of  exchange,  virtu- 
ally forbids  the  exchange  of  labor's  products  unless  the 


*The  fifth  question  was:  "What  effect  hns  this  depreciation 
of  the  American  dollar  (if  it  has  depreciated),  produced  as  to 
wages  or  prices  which  have  not  been  fully  adjusted  to  the  dimin- 
ished value  of  the  standard?" 

■77 


producers  pay  a  toll  for  the  right  of  exchange,  under  the 
guise  of  interest  on  money.  Owing  to  this  tax  on  ex- 
change, a  portion  of  the  wealth  produced  by  labor  is  ab- 
stracted by  non-producers  and  wages  instead  of  being 
equal  to  the  value  produced  by  labor,  equal  this  value, 
minus  the  amount  (from  thirty  to  fifty  per  cent)  which 
with  the  connivance  of  those  that  formulate  our  banking 
laws,  is  abstracted  by  non-producers,  from  the  real  pro- 
ducers. ('Wages'  is  here  used  in  the  economic  sense, 
meaning  recompense  for  'labor'  whether  performed  by 
workmen,  foremen,  employers,  clerks,  merchants,  teach- 
ers, etc.,  etc.)" — Hugo  Bilgram. 

"Variations  in  wages  and  prices  usually  have  their  in- 
dividual proximate  causes.  A  depreciation  of  money 
tends  to  increase  prices  and  wages  when  expressed  in  dol- 
lars. Money  depreciation  would  show  by  the  general  and 
uniform  increase  in  wages  or  prices." — ^John  Balch 
Blood. 

"Wages  and  prices  which  have  not  been  raised  to  meet 
the  depreciated  dollar  have,  in  effect,  suffered  an  actual 
and  real  decline,  although  not  a  nominal  decline." — 
James  E.  Boyle. 

"It  has  lowered  them." — Charles  J.  Bullock. 

"It  has  lowered  them." — Victor  S.  Clark. 

"There  has  not  been  a  uniform  adjustment.  In  the 
building  trades  in  some  cases  I 'think  the  adjustment  has 
been  more  than  made.  Some  forms  of  union  labor  have 
forced  wages  to  points  that  are  truly  monopolistic  in 
their  character.  Other  forms  still  lag  behind."— J.  W. 
Crook. 


''Virtually  lowered  them."— F.  R.  Clow. 

"Prices  have  gone  up  and  wages  down.  Some  would 
say  that  the  value  of  the  dollar  has  appreciated,  but  I 
mean  relatively  to  prices,  the  dollar's  purchasing  power, 
or  real  value,  has  declined." — F.  S.  Crum. 

^'Incomes  and  prices  which  have  remained  fixed  nomi- 
nally have  really  fallen." — John  Cummings. 

"A  real  and  serious  depreciation." — H.  T.  Davenport. 

^'Impossible  to  define  in  exact  terms." — Davis  R. 
Dewey. 

"(a)  It  has  reduced  the  real  wages  of  course,  if  nomi- 
nal wages  have  remained  constant  or  have  not  advanced 
proportionately. 

*'(b)  I  again  object  to  the  use  of  price  in  two  senses. 
Assuming,  however,  that  the  price  of  an  article  in  1897 
was  the  same  as  it  was  in  1907,  I  should  think  that  some- 
thing must  have  happened  to  lower  the  cost'  of  its  produc- 
tion, or  that  the  producer  would  be  making  less  profit  per 
unit  of  output  than  before.  I  should,  however,  want  to 
see  his  bank  account  before  deciding  off-hand  that  he  was 
being  ruined  by  charging  the  old  price." — Carroll  W. 

DOTEN. 

"Every  depreciation  of  money  unless  extended  over  a 
very  long  period  has  unequal  effects  on  wages  and  prices 
for  the  time  being.  Should  general  prices  and  wages  rise 
commodities  produced  in  industries  where  fixed  capital  is 
largely  employed  furnish  relatively  a  larger  profit.  It 
takes  time,  sometimes  a  very  long  time,  for  these  price 
changes  to  become  adjusted.  All  industries  where  there 
are  fixed  charges  and  rates  are  likely  to  suflfer." — Gar- 
rett Droppers. 

79 


"All  whose  wages  or  whose  prices  for  commodities  pro- 
duced have  not  kept  pace  with  the  rise  in  prices  of  the 
things  they  buy  are  by  so  much  poorer  than  in  1897,  with 
this  important  exception,  namely — employers  who  by  va- 
rious improvements,  such  as  electrification,  utilization  of 
byproducts,  more  efficient  organization,  etc.,  have  re- 
duced the  expenses  of  production  may  be  better  off  in 
spite  of  the  failure  of  the  thing  they  produce  tD  advance 
as  rapidly  in  price  as  the  prices  of  otjher  commodities." — 
C.   F.  Emerick. 

"Do  not  know." — A.  B.  Fairchild. 

"The  depreciation  of  the  American  dollar  has  caused  a 
decline  in  real  wages  or  prices  in  all  cases  where  the 
wages  or  prices  have  not  been  fully  adjusted  to  the  di- 
minished value  of  the  standard  by  a  corresponding  rise." 
— Fred  R.  Fairchild. 

"The  effect  is  a  depreciation  of  the  real  income  of  the 
laborer  or  the  person  who  lives  by  selling  at  the  prices 
which  have  not  yet  been  adjusted." — ^Willard  C.  Fisher. 

"Has  caused  them  to  fall  relatively." — J.  D.  Forrest. 

"Wages  and  prices  that  have  not  increased  sufficiently 
to  compensate  for  the  depreciation  have,  of  course,  rela- 
tively fallen." — George  P.  Garrison. 

"Such  wages  and  prices  have  relatively  decreased." — 
David  I.  Green. 

"It  has  undoubtedly  meant  that  laborers  whose  money 
wages  remained  constant  or  rose  less  than  proportionately 
have  received  less  real  wages." — Lewis  H.  Haney. 

80 


"The  effect  of  this  depreciation  has  been  to  lower  in 
effect  the  wages  and  salaries  of  those  receiving  stated 
compensation.  In  the  large  majority  of  instances  that 
have  come  under  my  observation,  there  has  been  little  or 
no  increase  in  such  compensation,  and  outside  of  cases 
where  there  has  been  legislation  on  the  subject  princi- 
pally as  to  public  officers,  I  know  of  very  few  instances 
where  the  adjustment  of  wages  has  been  sufficient  to  meet 
the  depreciation." — W.  O.  Hart. 

"Wages  and  prices  of  services  and  commodities  the  pro- 
duction of  which  does  not  involve  a  considerable  element 
of  immobile  labor  or  fixed  capital,  or  the  control  of  which 
is  not  in  the  hands  of  a  monopoly,  have  automatically  ad- 
justed themselves  to  the  changing  standard.  Specialized 
labor  and  capital  and  monopolies  habitually  exacting  the 
price  of  maximum  returns  are  liable  to  suffer  a  dispropor- 
tionate nominal  return  and  a  decreased  real  return." — R. 
H.  Hess. 

"Some  laborers  have  suffered  because  of  the  lessened 
purchasing  power  of  their  wages. 

"Some  producers  have  also  suffered  but  not  to  same 
extent  as  laborers.  Brief  answer  impossible." — Joseph 
French  Johnson. 

"Correct  answer  to  this  question  depends  upon  the 
meaning  of  the  words  'adjusted  to  the  diminished  value  of 
the  standard.'  If  a  man's  wages  have  not  increased  pro- 
portionately to  the 'prices  of  the  articles  he  has  been  ac- 
customed to  buy,  his  actual  income  is  reduced. 

"A  concern  may,  of  course,  be  paying  higher  wages  and 
higher  prices  with  as  great  a  profit  as  before,  if  its  busi- 
ness has  materially  increased,  or  if  improved  methods  of 
production  have  been  introduced." — E.  W.  Kemmerer. 

8i 

2—6 


"If  nominal  wages  have  not  risen  in  the  past  twelve 
years  in  the  same  proportion  as  prices,  then  real  wages 
are  not  as  high  as  they  were  in  1897.  The  effect  is  a 
lower  standard  of  living  wherever  this  has  happened,  a 
worse  condition  for  the  wage  earner." — David  Kinley. 

"It  is  manifestly  unfair  not  to  increase  wages  and  prices 
so  they  will  be  fully  adjusted  to  the  diminished  value  of 
a  dollar." — M.  A.  Kursheedt. 

"Prices  appear  to  have  risen  somewhat  more  than 
wages — the  per  cent  of  increase  in  reliable  tables  shows 
this." — Charles  H.  Leeds. 

"In  this  instance  the  depreciation  in  the  standard  of 
value,  I  should  say  has  affected  prices  in  the  following- 
order  : 

"i.  Securities. 

"2.  Commodities  which  are  dealt  in  on  the  Produce  and 
other  exchanges. 

"3.  Other  commodities  which  are  handled  in  large 
quantities,  such  as  steel  rails,  brick,  lumber,  and  the  like. 

"4.  Manufactured  products  in  retail  lots. 

"5.  Wages. 

"6.  Railroad  rates. 

"I  am  inclined  to  think,  although  this  statement  can 
be  verified  so  far  as  I  know  by  detailed  statistics,  that  the 
prices  of  all  these  goods  have  been  adjusted  to  the 
changed  standard  with  the  exception  of  some  grades  of 
labor  and  railroad  rates." — W.  H.  Lough,  Jr. 

"In  such  cases  the  'nominar  increase  is  a  'real'  de- 
crease."— RoswELL  C.  McCrea.  • 

"Wages  and  prices  which  have  not  been  fully  ad- 
justed to  the  diminished  value  of  the  standard  have  actu- 
ally decreased." — John  Martin. 

82 


"Of  course  if  the  dollar  has  depreciated  twenty-five 
per  cent  and  a  laborer  receives  the  same  money  wage  in 
1908  that  he  received  in  1897,  he  really  receives  only 
three-fourths  as  much  purchasing  power." — Royal 
Meeker. 

"It  has  made  them  of  less  worth.  Unadjusted,  con- 
stant, wages  or  prices  (proceeds  of  sales  of  commodities), 
are  apparently  unchanged;  but  in  reality  they  are  lower, 
since  their  general  purchasing  power — general  wealth- 
commanding  power — is  reduced." — Charles  W.  Mixter. 

"This  question  should  be  reversed,  viz. :  what  effect  has 
the  increase  of  wages  and  increased  prices  of  commodities 
had  upon  the  dollar.  Ans.  Lowered  its  purchasing 
power. 

"This  problem  is  very  simple  when  we  regard  the  dol- 
lar as  a  iixed  standard  which  it  is.  Would  it  not  be  ex- 
ceedingly uncertain  in  commercial  dealings  if  a  yard 
measure,  a  peck,  or  a  pound  were  only  a  half-yard,  a 
half-peck,  or  a  half-pound  to-morrow?  These  measures 
do  not  change,  hut  the  goods  measured  in  these  standards 
fluctuate  in  price.  So  with  money,  as  a  measure  of  value, 
it  does  not  change." — James  B.  Morman. 

"The  real  depreciation  which  the  United  States  dollar 
has  undergone  since  1897  is  its  decrease  in  subjective 
value,  or  the  loss  which  its  possessor  would  subjectively 
suffer,  when  measuring  that  loss  as  a  percentage  of  in- 
come. This  loss  is  many  times  greater  for  the  laboring 
class  than  for  people  of  ordinary  means,  and  when  com- 
pared with  the  losses  of  the  rich  it  is  so  great  that  a  ques- 
tion arises  in  my  mind  whether  a  real  depreciation  in  the 
value  of  increments  of  income  above  $10,000  has  any  re- 
ality. From  this  point  of  view  wages  do  not  seem  to  me 
to  have  fully  adjusted  themselves  to  the  diminished  value 


of  the  standard.  An  increase  of  forty  per  cent  in  the 
nominal  wages  of  railway  employees  on  this  account  alone 
would  to  my  mind  be  nothing  too  high.  As  regards  prices 
which  have  not  adjusted  themselves  to  the  diminution  in 
the  value  of  the  dollar,  I  am  of  the  opinion  that  wages  in 
the  industries  concerned  have  lagged  behind  in  adjust- 
ment. The  value  of  labor  is  determined  by  the  .value  of  its 
products,  and  it  seems  to  me  that  abnormally  low  prices 
must  tend  to  produce  abnormally  low  wages." — George 

S.  MOYNAHAN. 

"They  have  fallen  and  the  loss,  per  unit  of  labor  or 
product,  to  the  laborer  or  producer,  is  measured  by  the 
diminution  in  the  purchasing  power  of  the  wages  or  prices 
received  per  unit  of  labor  or  product." — H.  T.  Newcomb. 

''Since  real  wages  depend  on  the  general  level  of  prices, 
they  have  suffered  where  they  have  not  kept  pace  with  the 
average  price  of  goods. 

"This  is  not  true  of  prices  and  rates." — L.  W.  Parish. 

"The  prices  are  probably  fairly  well  adjusted  by  now, 
but  many  wages,  and  especially  the  great  number  of  sal- 
aried incomes,  have  not  received  the  full  benefit  of  an  in- 
crease proportionate  to  the  fall  in  value  of  money.  Here 
again  a  definite  statement  is  well  nigh  impossible." — 
Julius  H.  Parmelee. 

"The  wage  earner  whose  wages  have  not  become  ad- 
justed to  the  increased  prices  is  a  loser.  If  prices  have 
gone  up  fifty  per  cent  he  can  command  only  sixty-six  and 
two-thirds  as  much  of  this  wo'rld's  goods  as  he  could  in 
1897.  The  bondholder  receiving  a  fixed  contract  rate  of 
interest,  likewise  suffers  as  the  purchasing  power  of  his 
five  per  cent  interest  decreases.  He  could  buy  more  goods 
with  the  dollars  that  he  loaned  in  1897  than  with  the  same 

84 


number  of  dollars  returned  to  him  ten  years  later.  Meas- 
ured in  goods  his  principal  has  decreased  thirty-three  and 
one-third  per  cent." — Warren  M.  Persons. 

"Reduces  them." — Carl  C.  Plehn-. 

''It  would  have  the  same  effect  as  a  fall  in  the  relative 
prices  or  wages.  For  example,  a  teacher  who  got  $2,000 
a  year  in  1896  and  is  still  getting  $2,000  has  really  suf- 
fered a  decline  in  salary  of  not  much  less  than  $500.00. 
Of  course,  the  same  reasoning  is  true  of  railway  rates. 
If  you  charged  $10.00  for  a  certain  haul  in  '96  and  to-day 
are  charging  $10.00  for  the  same  haul,  rates  have  really 
fallen,  when  prices  and  wages  are  taken  into  account, 
which  are  in  daily  constant  adjustment  to  the  monetary 
standard." — Jesse  E.  Pope. 

"All  fixed  or  difficultly  modified  prices  (as  wages,  pub- 
lished or  legal  rates,  etc.)  have  virtually  lowered." — H. 
H.  Powers. 

"This  depreciation  has  affected  prices  as  a  whole  far 
more  than  w^ages,  as  prices  respond  to  such  changes  far 
more  readily  than  do  wages ;  and  wages  of  organized  la- 
bor, more  readily  than  unorganized.  Doubtless,  prices,  as 
a  whole,  have  so  changed  as  fully  to  reflect  the  deprecia- 
tion of  the  gold.  Real  estate  and  railroad  properties  do 
not  yet  reflect  fully  the  change  made ;  and  wages,  but  lit- 
tle."—L.  G.  Powers. 

"Wages  or  prices,  which  have  not  increased  so  as  to 
keep  pace  with  the  depreciation  in  money,  have  actually 
fallen." — Lawson  Purdy. 

"It  has  generally  raised  nominal  wages  and  prices,  but 
in  many  cases  the  real  wages  and  prices  have  slightly  de- 
creased."— Charles  Lee  Rarer. 

85 


"The  corresponding  sellers  of  services  and  of  goods 
are  worse  off." — Walter  T.  Ray. 

"This  is  a  simple  question  of  decreased  purchasing 
power  of  wages  on  an  old  standard.  Government  salaries, 
for  instance,  fixed  by  old  statutes  are  entirely  inadequate 
for  modern  demands  on  the  incumbeints." — Gardner 
Richardson. 

"My  impression  is  that,  unless  in  a  few  most  favored 
mills  and  localities,  factory  wages  have  not  been  adjusted. 
The  range  of  virtual  sweating  scales  and  bases  of  pay- 
ment has  probably  been  extended,  and  the  margin  for  in- 
surance and  comfort  been  narrowed. 

"The  rates  for  services  rendered  by  some  of  the  larger 
and  the  monopolistic  corporations,  were  already  so  high, 
relatively,  that  the  depreciation  of  the  dollar  has  only 
tended  to  normalize  them.  The  like  may  be  true  of  a  few 
exceptional  pay-rolls  or  parts  of  pay-rolls." — Philip  A. 
Robinson. 

"Real  wages  are  lower  in  that  proportion — except  that 
the  statistics  do  not  include  rent  and  refer  to  wholesale 
rather  than  retail  prices — in  occupations  where  'nominal' 
or  money  wages  are  unchanged.  Commodities  whose 
prices  have  not  risen  in  this  proportion  have  fallen  in 
value  measured  in  commodities  generally." — Henry  R. 
Seager. 

"The  depreciation  of  the  dollar  is  seen  in  its  diminished 
purchasing  power,  or,  which  is  the  same  thing,  the  gen- 
eral rise  in  prices.  But  prices  do  not  all  rise  equally  or 
simultaneously.  It  follows  that  any  class  is  placed  at  a 
disadvantage  as  compared  with  other  classes,  if  the  thing 
which  it  produces  or  sells  is  influenced  less  by  the  rise  in 
prices  than  are  the  things  which  that  class  must  buy.  The 

86 


wage-earner  gains  something  in  the  regularity  of  employ- 
ment which  accompanies  rising  prices,  but  the  tardy  ad- 
justment of  money  wages  to  the  new  level  of  general 
prices  tends  to  lower  his  real  wage." — J.  Allen  Smith. 

"It  has  had  the  effect  of  lowering  real  wages  and  prices 
of  competitive  goods." — N.  I.  Stone. 

"It  would  lower  the  return  per  unit.  Such  a  lowering 
may  be  no  more  than  is  just  and  should  have  otherwise 
been  brought  about  owing  to  other  factors  that  enter  into 
prices  or  wages." — George  S.  Sumner. 

"The  depreciation  of  the  dollar  is  in  proportion  only  to 
the  increased  amount  of  money  per  capita  in  actual  use 
and  which  may  vary  in  different  localities  and  at  differ- 
ent times." — Frank  J.  Symmes. 

"Of  course  it  has  had  the  effect  of  reducing  the  real 
income  in  that  which  money  merely  enables  us  to  get  for 
our  labor  or  commodities.  Yet  the  process  by  which  this 
reduction  comes  about  is  so  concealed  and  gradual  that 
the  masses  do  not  appreciate  the  situation." — J.  A.  Til- 
linghast. 

"Wages  and  prices  which  have  not  risen  in  proportion 
to  the  decrease  in  the  purchasing  power  of  the  dollar  con- 
stitute proportionately  lower  purchasing  power,  or  ex- 
change value  in  terms  of  goods  and  services." — Edson 
Newton  Tuckey. 

"Reduction." — E.  B.  Waller. 

"We  can  hardly  speak  of  prices  not  being  adjusted, 
since  every  price  is  an  element  in  the  measurement  of  the 
depreciation  of  the  dollar.     The  adjustment  of  wages 

87 


means  that,  for  wage-earners  to  hold  their  own  in  com- 
petition with  other  income  earners  and  income  receivers, 
wages  ought  to  rise  in  the  same  proportion  as  general 
prices,  and  if  they  have  not  done  so,  this  is  a  fall  in  the 
rate  of  real  wages,  which  means  that  wage-earners  are 
suffering  on  account  of  the  behavior  of  the  monetary 
standard  and  that  employers  of  labor  are  gaining  at  their 
expense." — C.  M.  Walsh. 

*'The  adjustment  of  wages  and  prices  to  a  changing 
value  in  money,  even  in  industries  in  which  wage-scales 
are  most  easily  changed,  is  a  slow  and  difficult  process  and 
hence  the  importance  of  preserving  the  utmost*  stability  in 
the  value  of  money.  In  my  opinion  there  is  no  problem 
more  important  before  the  world." — A.  J.  Warner. 

^'Depreciation  of  the  dollar  does  not,  of  itself,  produce 
any  effect  on  wages.  The  wage  earners  produce  the  effect 
by  demanding  an  increase,  although  in  some  rare  cases 
the  employers  anticipate  the  demand  and  make  the  in- 
crease voluntarily." — Horace  White. 

"Obviously,  quite  obviously,  it  has  cut  from  thirty- 
three  and  one-third  per  cent  to  twenty  per  cent  off  from 
the  real  wages,  where  no  adjustment  has  taken  place. 
Adjustment,  therefore,  would  take  place  within  these  lim- 
its of  discount  and  parity.  In  many  cases  other  indepen- 
dent forces  have  brought  real  wages  above  the  '97  level." 
— George  Ray  Wicker. 

"Lowered  them." — M.  S.  Wildman. 

"Lowered  them.,  of  course,  in  the  exact  proportion  in 
which  they  have  not  been  fully  adjusted." — A.  B.  Wood- 
ford. 

"Virtually  to  lower  them."— Lester  W.  Zartman. 


ANSWERS  TO  THE  SIXTH  QUESTION.* 

"I  do  not  know.  I  am  not  an  expert  in  this  particular 
field."— T.  S.  Adams. 

''No." — Eugene  E.  Agger. 

"No,  neither  then  nor  now — 

"i.  In  proportion  to  the  charges  for  transportation  by 
other  methods  than  by  rail  in  this  country. 

"2.  In  proportion  to  the  charges  for  similar  services  iv 
other  countries. 

"3.  In  their  proportion  to  the  retail  cost  of  the  articles 
transported. 

"4.  In  the  profits  derived  from  them  in  proportion  to 
the  profits  derived  from  other  business  enterprises  involv- 
ing similar  current  expenditures." — W.  F.  Allen. 

"A  very  difficult  question.  I  am  inclined  to  think  they 
ranged  too  high  in  consequence  of  the  same  sort  of  causes, 
acting  in  the  opposite  direction  which  now  tend  to  render 
them  too  low,  i.  e.,  gold  was  appreciating  from  '73  to  '97, 
and  gold  prices  that  did  not  apparently  fall  were  really 
growing  higher  and  higher." — E.  Benjamin  Andrews. 

"If  the  general  level  of  railway  rates  as  indicated  by  the 
average  percentage  earned  by  the  roads  throughout  the 
United  States  upon  the  capital  invested  is  of  value  as  a 
criterion,  I  am  inclined  to  think  that  the  rates  of  1897 
were  not  too  hip-h." — C.  C.  Arbuthnot. 


*The  sixth  question  was :  "Were  the  freight  rates  charged  by 
the  railways  of  the  United  States  in  the  year  1897,  in  your  opin- 
ion, generally  too  high?" 

89 


"No,  except  in  special  cases.  On  the  average  our  rates 
have  been  better  than  in  any  other  country,  and  the  service 
better  as  well. 

"On  the  other  hand,  real  rates  should  have  declined 
during  this  period  to  produce  the  maximum  profit  to  the 
stockholders,  as  at  that  time  the  rails  were  not  fully  em- 
ployed and  it  was  to  their  interest  to  stimulate  traffic.  We 
are  now  entering  another  stage  where  it  will  be  necessary 
to  raise  real  rates  to  reduce  traffic,  as  the  facilities  are  be- 
.  coming  overtaxed,  and  it  is  difficult  to  increase  them,  ow- 
ing to  the  prohibitory  cost  of  terminal  facilities." — N.  T. 
Bacon. 

"The  reports  of  railroads  and  statistics  bearing  on  this 
subject  available  to  the  public  are  such  that  it  is  hard  to 
determine  what  are  proper  freight  rates.  Much  evidence 
that  has  come  out  recently  with  reference  to  rebating 
would  indicate  that  the  rates  in  1897  were  too  high.  Evi- 
dence also  with  reference  to  the  issuance  of  securities 
against  railroad  properties  is  such  as  would  indicate  that 
considerable  amount  had  been  paid  in  dividends  on  securi- 
ties which  originally  did  not  represent  capital,  which 
would  tend  to  show  that  the  rates  of  1897  were  too  high." 
— ^JoHN  Balch  Blood. 

"Considering  freight  rates  here  and  abroad,  I  would 
say  'No.'  I  believe  the  public  never  felt  rates  were  too 
high,  but  only  that  cases  of  discrimination,  rebates,  etc., 
made  them  unequal  and  hence  unjust." — James  E.  Boyle. 

"My  opinion  on  this  point  would  be  of  little  or  no  value. 
An  intelligent  answer  to  this  question  would  require  a  de- 
tailed and  exhaustive  statistical  investigation.  The  im- 
portant point  is  not  whether  rates  are  too  high  or  too  low. 
The  question  is,  are  they  discriminating  in  1908,  or  were 
they  discriminating  in  1897?'' — John  E.  Brindley. 

90 


"In  general  I  suppose  that  freight  rates  were  not  ex- 
cessive ;  but  there  may  have  been  numerous  cases  in  which 
they  were  so/' — Charles  J.  Bullock. 

"I  do  not  see  how  any  unquahfied  answer  can  be  given 
to  this  question.  It  might  be  answered  as  to  specific  rates, 
in  their  relation  to  the  prosperity  of  particular  industries ; 
and  to  average  rates  in  their  relation  to  railway  income; 
but  I  am  not  sufficiently  informed  of  rates  in  these  two 
relations  to  venture  an  opinion  for  the  railways  of  the  en- 
tire country." — Victor  S.  Clark. 

'*I  am  unable  to  answer." — F.  R.  Clow. 

"I  am  unable  to  figure  this  out,  because  I  have  no  data 
which  enables  me  to  get  at  the  true  value  of  the  various 
railroad  investments.  Since  freight  rates  charged  must  or 
ought  to  yield  a  sufficient  profit  upon  the  investment  to 
correspond  with  other  investments,  the  true  value  of  the 
investment  is  an  important,  and  indispensable  matter. 
Then,  too,  different  localities  are  differently  affected. 
Speaking,  however,  of  rates  on  special  articles  I  would 
say  that  if  the  rates  existing  in  1897  still  obtained,  many 
present  establishments  would  not  have  been  built  up.  This 
is  especially  true  of  interstate  rates." — Morris  M.  Cohn. 

"I  should  not  say  so.  When  we  remember  the  drastic 
period  just  preceding  and  the  period  just  at  the  present 
and  other  poor  earning  periods  to  come,  and  the  great  dif- 
ficulty of  finding  the  organizing  ability  of  a  Hill  or  a  Har- 
riman,  the  rates  were  not  too  high." — J.  W.  Crook. 

"Not  as  a  rule." — John  Franklin  Crowell. 

"Not  prepared  to  say." — F.  S.  Crum. 

91 


"They  were  probably  determined  then,  as  at  other 
times,  largely  by  consideration  of  what  the  traffic  would 
bear,  and  by  competition.  A  railroad  rate,  whatever  it  be, 
is  bound  to  be  at  any  given  time,  both  too  high  and  too 
low — too  high  from  certain  points  of  view  and  for  certain 
purposes ;  too  low  from  other  points  of  view  and  for  other 
purposes.  The  phrase  ^generally  too  high'  has  no  mean- 
ing except  with  reference  to  these  specific  ends  and 
points  of  view.'' — John  Cummings. 

**Here  again  I  will  not  venture  on  an  opinion  unless  I 
am  sure  that  we  have  a  common  standard  of  what  consti- 
tutes too  high  a  level  of  freight  rates.  In  general,  freight 
rates  are  too  high  if  they  prevent  the  moving  of  the  nor- 
mal volume  of  products,  or  if  they  afford  a  net  profit  in 
excess  of  a  proper  return  upon  the  actual  capital  invested 
and  the  risk  involved  in  building  and  operating  railroads. 
They  are  too  low,  if  they  afford  so  low  a  margin  of  pro- 
fit as  to  make  the  building  or  operating  of  railroads  un- 
profitable in  the  long  run.  Competent  and  unbiased 
transportation  experts  will  judge,  in  accordance  with 
these  general  tests,  whether  rates  in  1897  were  too  high." 
— W.  M.  Daniels. 

**Not  for  the  volume  of  business  then  handled." — H. 
T.  Davenport. 

"The  consumer  will  generally  think  prices  are  too  high. 
I  do  not  see  what  absolute  standard  can  be  used  as  a  test." 
— Davis  R.  Dewey. 

"This  is  too  large  a  question  to  answer  off-hand.  Some 
doubtless  were  and  some  were  not..  What  do  you  mean 
by  too  high  ?  Is  it  too  high  to  enable  industries  to  develop 
and  prosper,  or  too  high  to  result  in  the  largest  profit  to 
the  railroads  or  too  high  because  the  railroads  were  en- 
abled thereby  to  make  excessive  profits  ? 

92 


"It  seems  to  me  that  this  method  of  approach  to  your 
real  point  is  utterly  futile  and  even  if  it  were  not  it  would 
be  absolutely  inconclusive.  You  have  got  to  prove  first 
that  railroad  charges  were  reasonable  in  1897  and  after 
that  by  a  long  series  of  inferences  that  the  same  rates  or 
practically  the  same  now  are  not  reasonable  because  they 
are  unjust  to  the  railroads.  All  that  such  a  comparison 
can  possibly  amount  to  is  to  show  that  there  has  appar- 
ently been  a  reduction  in  the  cost  of  transportation  to  the 
shipper  when  rates  are  compared  with  the  prices  in  which 
he  sells  his  goods.  Whether  this  is  more  or  less  of  a  re- 
duction than  should  have  been  made  in  justice  to  all  con- 
cerned must  be  decided  on  other  grounds  than  a  mere 
comparison   of   wage   and   price   levels." — Carroll   W. 

DOTEN. 

"I  do  not  know.  Freight  rates  are  a  very  complex 
affair.  Speaking  generally  I  should  think  that  the  rates 
on  staple  products  over  trunk  lines  were  not  high  in 
1897." — Garrett  Droppers. 

''As  to  the  average  per  ton  mile  rate,  I  think  not." — C. 
F.  Emerick. 

"No.  Discrimination  was  the  great  evil.  Some  local 
rates  were  very  high." — A.  B.  Fairchild. 

"The  answer  to  this  question  must  be  a  matter  of 
judgment.  The  only  persons  qualified  to  give  such  judg- 
ment are  those  who  are  experts  in  railway  economics. 
I  do  not  consider  myself  competent  to  express  an  opin- 
ion."— Fred  R.  Fairchild. 

"If  by  generally  you  mean  universally,  certainly  not ;  if 
you  mean  in  many  cases,  I  should  certainly  say  yes.  (The 
railway  business  is  a  quasi-public  business ;  and  any  rate 

93 


is  too  high  which  returns  to  the  capital  actually  invested 
more  than  the  prevalent  rate  of  income  from  safe  busi- 
ness investments.  Just  so,  any  rate  of  postage  is  too 
high  if  it  is  much  more  than  the  cost  of  the  actual  ser- 
vice ;  and  any  rate  of  taxation  is  too  high,  if  it  brings  in 
a  surplus  which  cannot  be  expended  for  the  common 
good." — WiLLARD  C.  Fisher. 

"Generally  not." — J.  D.  Forrest. 

"No.  It  could  well  be  to  the  advantage  of  the  country 
to  have  rates  raised  enough  to  correspond  with  the  depre- 
ciation in  the  dollar." — A.  G.  Fradenburgh.* 

"I  believe  so." — George  P.  Garrison. 

"Perhaps  not  in  general  though  some  were,  but  the 
average  rates  should  decrease  as  the  amount  of  traffic  in- 
creases."— David  I.  Green. 

"In  my  opinion  the  average  freight  rate  was  not  too 
high.  This  does  not  mean  that  I  think  all  rates  were  rea- 
sonable. " — Lewis  H.  Haney. 

"Not  being  in  business,  I  know  comparatively  little 
about  railroads,  but  from  my  reading  and  general  inter- 
course with  business  men  in  this  section  of  the  country, 
the  general  opinion  is  that  railroad  rates  were  too  high  in 
1897/^— W.  6.  Hart. 

"As  measured  by  legitimate  costs  of  operation  and  jus- 
tified fixed  charges  the  level  of  rates  in  1897  was  too 
high."— R.  H.  Hess. 

"I  do  not  know." — Joseph.  French  Johnson. 

94 


'*I  have  never  made  a  sufficient  study  of  this  question 
to  be  justified  in  expressing  an  opinion.  In  1897  the 
railroads  were  quite  generally  complaining  that  rates 
were  too  low  as  the  result  of  the  depression  of  1893- 
1897;  and  there  was,  I  believe,  a  very  large  increase  of 
rates  in  1900. 

"A  general  answer  to  your  question  I  should  think, 
would  be  dangerous,  because  of  the  different  rates  (i) 
on  different  roads,  (2)  on  different  kinds  of  traffic 
(through  and  local),  (3)  and  on  different  classes  of 
commodities." — E.  W.  Kemmerer. 

"I  am  not  prepared  to  express  an  opinion  on  this  ques- 
tion."— David  Kinley. 

"I  am  not  sufficiently  conversant  with  the  freight 
rates  charged  in  1897  to  be  able  to  answer  this  question." 

M.   A.   KURSHEEDT. 

"No.  Net  earnings  were  not  excessive,  considering  the 
risks  of  investment  and  the  supply  of  capital.  And  since 
the  real  rates  have  been  less,  the  roads  have  had  difficulty 
in  getting  along." — Charles  H.  Leeds. 

"This  question,  it  seems  to  me,  does  not  admit  of  any 
definite  answer.  I  do  not  know  of  any  standard  by  which 
railroad  rates  as  a  whole  can  be  decided  to  be  either  too 
high  or  too  low." — W.  H.  Lough,  Jr. 

"Probably  not, — considering  the  need  of  further  and 
better  equipment — at  present  there  is  a  pressing  need  of 
new  tracks  (i.  e.,  when  business  was  active  and  when  it 
is  again  in  normal  condition).  The  public  demands  lower 
rates  which  prevents  needed  improvements  and  reckless 
speed  which  the  tracks  are  not  fit  for." — Arthur  T. 
Lyman. 

95 


"Generally,  no." — Roswell  C.  McCrea. 

**This  question  can  be  answered  only  when  much  ad- 
ditional data  are  supplied,  including, 

"(a)  The  physical  value  of  the  roads. 

"(b)  Their  total  capitalization. 

"(c)   Their  gross  and  net  earnings. 

"But  Hnes  are  so  long  and  the  character  of  their  con- 
struction, traffic,  etc.,  varies  so  widely  that  any 
generalization  about  rates  is  probably  wrong.  Each  line 
should  be  considered  separately.  Rates  that  would  be 
outrageously  high  in  New  York  or  Pennsylvania  might 
be  ruinously  low  in  Texas  or  Arizona." — John  Martin. 

"It  is  not  possible  to  answer  this  question." — Royal 
Meeker. 

"No." — Charles  W.  Mixter. 

"I  do  not  think  they  were ;  but  this  is  a  hard  question 
to  answer.  'Too  high/  What  standard  are  we  to  meas- 
ure by?  Did  the  rates  charged  bring  high  dividends  to 
stockholders?  If  so,  the  rates  were  too  high;  if  not,  they 
may  have  been  just  and  equitable,  or,  perhaps,  too  low. 
But  I  cannot  say." — ^James  B.  Morman. 

"Freight  rates  charged  by  the  railways  of  the  United 
States  in  the  year  1897  were  not  too  high.  Since,  how- 
ever, there  seems  to  be  an  abnormal  advance  in  the  price 
of  railway  supplies  and  a  slight  (though  insufficient)  ad- 
vance in  wages,  an  advance  of  freight  rates  of  fifty  per 
cent  above  those  of  1897  would  on  this  account  be  justi- 
fiable were  not  also  another  fact  operative.  This  other 
fact  is  one  not  generally  recognized.  It  is  the  increased 
efficiency  of  every  dollar  passing  through  the  hands  of 
the  railways  from  the  point  of  view  of  railway  technique. 

06 


The  equipment  purchased  for  $1.50  to-day  is  much  more 
effective  than  the  corresponding  equipment  purchased  for 
$1.00  in  1897.  A  fair  dividend  may  therefore  be  paid 
to  stockholders  at  a  small  increase  in  rates.  To  deter- 
mine the  proper  amount  of  increase  is  the  business  of  the 
Interstate  Commerce  Commission,  or  other  authorized 
parties,  though  the  railways  may  act  of  their  own  accord. 
(See  article  on  'The  Needs  of  the  Railroads'  in  Political 
Science  Quarterly  for   September,   1908)." — George  S, 

MOYNAHAN. 

''No.  Conclusive  evidence  that  railway  charges  were 
not  generally  too  high  in  1897,  and  have  not  been  gen- 
erally too  high  since  that  year,  is  to  be  found  in  the  large 
and  steady  increase  of  the  per  capita  consumption  of  rail- 
way services.  Unjust  exactions  cannot  coincide  with  a 
great  and  general  augmentation  of  consumption.  Il 
railway  rates  had  been  too  high  they  would  have  impedec] 
the  local  specialization  of  industrial  functions — it  is  plain 
that  cheap  railway  transportation  has  vastly  augmented  it 
and  had  done  so  by  the  year  1897.  The  population  of  the 
United  States  in  1880,  1890,  1895  and  1897,  the  number 
of  tons  of  freight  carried  one  mile  by  the  railways  in  the 
same  years  and  the  number  of  tons  of  freight  carried  one 
mile  by  railways  per  capita  of  population  appear  below: 


Ton  mileage 

Year. 

Population. 

Ton  mileage. 

per  capita. 

1880 

50,155,783 

32,348,846,693 

645 

1890 

62,622,250 

76,207,047,298 

1217 

1895 

69,043,000 

85,227,515,891 

1234 

1897 

71,704,000 

95,139,022,225 

1327 

"In  addition,  American  railways  rates  were  in  1897  as 
they  are  at  present,  the  lowest  in  the  world;  the  lowest 
consistent  with  fair  compensation  to  labor,  and  too  low 
to  afford  a  return  to  capital  equal  to  that  in  other  in- 
dustries involving  similar  risk." — H.  T.  Newcomb. 

97 


"I  do  not  consider  myself  a  good  judge  of  the  justice  of 
railroad  rates.  According  to  your  own  basis,  they  should 
have  been  ver^y  low  compared  with  rates  previous  to  1890, 
since  general  prices  were  lower  between  1890  and  1897 
than  for  many  years  before.  (See  statistics  by  Comp- 
troller of  the  Treasury,  Roberts.)" — L.  W.  Parish. 

"A  stiff  question  to  answer  off-hand.  Probably  not  in 
the  main  ,\  the  conditions  in  different  sections  vary  too 
much  to  admit  of  a  general  statement." — Julius  H. 
Parmelee. 

''In  my  opinion  it  is  impossible  to  tell  whether  freight 
rates  were  or  are  too  high  or  too  low  without  a  physical 
valuation  of  the  railway  properties.  The  various  and  in- 
tricate methods  of  financiering  used  do  not  make  it  easy 
to  answer  the  question,  'What  is  a  reasonable  rate  ?'  " — 
Warren  M.  Persons. 

"Judging  solely  by  the  fact  that  the  railroads  found  it 
to  their  advantage  to  reduce  them  in  face  of  the  deprecia- 
tion of  the  currency,  yes." — Carl  C.  Plehn. 

"No,  if  you  will  permit  me  to  say  so,  we  suffered  from 
favoritism  rather  than  from  high  rates.  But  this  is 
largely  of  the  past.  As  a  whole,  railway  rates  in  this 
country  have  been  very  low  compared  with  other  coun- 
tries, and  with  the  difficulties  which  have  had  to  be  over-  ^ 
come." — Jesse  E.  Pope. 

"They  probably  would  be  too  high  now  if  the  dollar 
had  not  depreciated.  This  may  have  scaled  them  too 
much." — H.  H.  Powers. 

"I  have  not  studied  the  question  of  railroad  rates  suf- 
ficiently to  give  an  answer." — L.  G.  Powers. 

98 


"I  don't  know.  Freight  rates  should  be  sufficient  to 
pay  the  actual  cost  of  production  of  the  railway.  When 
the  cost  of  production  of  the  railway  is  unknown  it  is  im- 
possible to  determine  what  would  be  a  fair  rate." — Law- 
son  PURDY. 

"I  am  not  an  expert  on  the  cost  of  running  a  railway, 
but  the  salaries  paid  and  dividends  declared  by  some  of 
the  roads  indicate  that  they  were  not  running  at  a  loss 
and  that  those  that  did  run  at  a  loss  had  mismanagement 
or  the  combination  of  other  roads  to  blame  for  it.  I  do 
not  understand  that  it  is  the  ^general'  average  of  rates 
which  is  causing  dissatisfaction,  but  rather  the  irregu- 
larity of  rates  as  between  places,  persons  and  times." — H. 

W.   QUAINTANCE. 

'*No,  I  think  that  freight  charges  in  1897  in  the  United 
States  were  very  reasonable  indeed." — ^Charles  Lee 
Raper. 

*'I  do  not  know ;  probably  not." — Walter  T.  Ray. 

"No — it  does  not  seem  to  me  they  were.  There  was 
undoubtedly  unjust  discrimination  rife  at  that  period,  and 
exactly  what  *the  freight  rates  charged'  means  is  indefi- 
nite. Published  rates  were  rebated  by  more  than  half. 
That  puts  the  railroad  in  a  bad  light,  but  still  the  rates 
were  certainly  not  inordinate,  in  comparison  to  the  ser- 
vice rendered  at  all  events." — Gardner  Richardson. 

'T  would  answer,  'no,  probably  not,'  provided  we  are  to 
accept  as  normal  all  the  regular  and  usual  disbursements 
of  the  railways  on  account  of  freight  service,  or  on  ac- 
count of  conducting  transportation  generally.  I  use  this 
latter  phrase,  not  in  the  technical  sense  so  much  as  stand- 
ing for  the  railway  business  in  the  whole  of  its  economic 
and  political  relations." — Philip  A.  Robinson. 


'*No,  but  general  statements,  about  a  problem  that  is 
essentially  one  of  intricate  details  seem  to  me  to  be  of  no 
great  value.  No  doubt  some  rates  were  too  high,  doubt- 
less others  were  too  low  to  be  fairly  remunerative.  My 
negative  answer  is  based  on  general  considerations  and 
is  an  impression  only." — Henry  R.  Seager. 

"This  is  a  question  I  would  not  attempt  to  answer  in 
the  time  and  space  at  my  disposal  here." — J.  Allen 
Smith. 

'1  have  not  studied  this  question." — N.  I.  Stone. 

''Not  generally.  The  change  in  amount  of  traffic  in 
the  past  ten  years  is  such  that  justice  demands  a  lowering 
of  rates  in  many  instances  at  least  as  much  and  in  some 
cases  more  than  any  possible  lowering  of  rates  from  de- 
preciation of  money  standard — for  instance — fixed 
charges  in  certain  sections  can  now  be  divided  between 
twenty  trains  per  day  instead  of  twelve — so  warrant  a 
material  lower  rate  per  car." — George  S.  Sumner. 

"If  it  is  to  be  admitted  that  the  railways  are  justified  in 
making  rates  for  the  purpose  of  building  extensions  and 
adding  increased  capital  to  their  business — No. 

"If  rates  are  to  be  made,  as  in  the  final  solution  of  the 
problem  they  must,  solely  upon  the  actual  cost  of  service 
directly  involved — Yes. 

"The  building  up  of  feeders  to  a  railway  line,  the  cut- 
ting of  rates  to  meet  water  competition,  to  be  made  up 
by  excessive  rates  to  non-competitive  points,  and  the  hun- 
dred and  one  reasons  upon  which  railways  base  their  pres- 
ent rates  must  ultimately  give  way  to  a  rate  based  upon 
the  actual  cost  of  service,  viz.,  the  cost  of  terminal  hand- 
ling, operation,  maintenance  and  insurance  of  the  goods 
on  the  track  alone  over  which  they  are  transported." — 
Frank  J.  Symmes. 

100 


'*I  could  not  give  an  opinion  of  any  value  on  this  point 
for  lack  of  experience  and  information," — J.  A.  Tilling- 

HAST. 

"They  were  probably  not  'generally  too  high'  although 
I  have  not  reached  a  final  ppinion,  as  yet,  based  upon  sta- 
tistical investigation." — EteON  Newton  Tuckey. 

''Do  not  know.  The  great  trouble  with  this  whole  dis- 
cussion is  that  you  can  not  class  railroads  with  other  cor- 
porations. They  have  special  privileges,  sometimes  mo- 
nopolistic franchises.  Some  railroads  are  economically 
conducted.  Others  have  graft  for  the  sons  of  officials, 
etc.  Again  some  railroads  have  watered  their  stock  be- 
yond the  unearned  increment  to  which  they  may  be  enti- 
tled. There  is  a  good  deal  of  dispute  about  the  calcula- 
tion of  railroad  rates. 

"Your  questions  are  well  arrayed  to  bring  out  the  de- 
sired answer  (reduction)  but  you  omit  the  very  ques- 
tions which  are  in  dispute  to-day.  It  is  not  so  simple  as 
you  would  think  it." — E.  B.  Waller. 

"I  have  no  information  on  the  subject.  But  it  may  be 
noted  that  the  question  is  the  inverse  of  what  might  have 
been  asked  in  1897  compared  with  the  years  1883-9  when, 
if  Sauerbeck's  figures  may  be  relied  upon,  general  prices 
were  as  high  as  they  were  in  1907.  Just  as  the  trend  of 
your  questionaire  is  to  bring  out  that  railway  rates  are 
now  too  low,  the  result  of  a  similar  investigation  then 
made  might  have  shown  that  railway  rates  were  then  too 
high.  And  this  would  have  been  all  the  more  likely  be- 
cause in  1907  the  fall  of  general  prices  (the  appreciation 
of  money)  had  been  going  on  not  merely  for  ten  years, 
but  for  twenty- four  (since  1873)."— C.  M.  Walsh. 

"In  particular  cases,  yes,  but  not  generally." — A.  J. 
Warner. 

lOI 


"Freight  and  passenger  rates  were  too  high  then  and 
are  too  high  now,  on  any  system  of  honest,  real  capitaHza- 
tion  and  payment  for  service  rendered." — D.  C.  VYesten- 

HAVER. 

*'No." — Horace  White. 

"Probably  not  for  the  year  1897,  with  the  traffic  of  that 
year.  Probably  not,  if  viewed  in  their  bearing  on  the  traf> 
fie  of  1 892- 1 897.  For  many  roads  and  sections,  they  may 
well  have  been  too  low.  But  here  I  must  begin  dissent 
from  the  economic  value  of  your  line-  of  inquiry.  Rail- 
ways are  businesses  of  increasing  return  to  an  extent  that 
few  other  kinds  of  business  share.  Railways  are  natur- 
ally monopolies.  Therefore,  if  your  inquiry  is  to  deter- 
mine w^iat  are  fair  rates,  from  the  point  of  view  of -the 
stockholders,  you  must  seek  the  answer  by  another  route. 
A  low  rate  measured  by  proportion  of  rate  to  value  of 
commodity  carried  may  be  an  extortionate  rate,  from  the 
point  of  view  of  net  earnings  on  investment.  The  signi- 
ficant relation  here  is  not  that  between  freight  paid  and 
value  of  commodity,  but  between  rate  and  earnings." — 
George  Ray  Wicker. 

"Probably  not,  in  general." — A.  B.  Woodford. 

"Probably  not.  The  country  was  just  emerging  from  a 
long  depression,  especially  for  the  railroads,  and  rates  in 
general  were  low." — Lester  W.  Zartman. 


102 


ANSWERS   TO   THE   SEVENTH    QUESTION.* 

"A  reduction.  Railways  might  still,  however,  be  mak- 
ing greater  profits  than  in  1897 ;  and  present  rates  might, 
theoretically,  be  still  too  high.  It  is  entirely  possible, 
however,  that  they  are  too  low.  Your  real  problem,  I 
think,  should  be  settled — and  commonly  be  settled, — in 
another  way." — T.  S.  Adams. 

''Undoubtedly  a  reduction.  But  this  reduction  might 
be  offset  by  improvements  in  the  methods  of  transporta- 
tion not  involving  increased  or  at  least  proportionately 
greater  outlays.  To  understand  the  effects  of  the  real 
reduction  of  rates  not  only  wages  and  the  price  of  the  ma- 
terials must  be  taken  into  account  but  also  the  effect  of 
these  things  on  your  units  of  costs.  It  may  be  that  the  in- 
crease in  the  volume  of  business  has  been  much  greater 
(proportionately)  than  the  increase  of  costs  and  such  a 
condition  might  counteract  entirely  the  loss  due  to  a  de- 
cline in  the  real  rate.'' — Eugene  E.  Agger. 

"Unquestionably  a  reduction,  unless  the  rule  of  three  is 
an  incorrect  mathematical  principle.'' — W.  F.  Allen. 

''Reduction  of  course." — E.  Benjamin  Andrews. 

"Reduction." — C.  C.  Arbuthnot. 


*The  seventh  question  was:  ''Assuming  that  $1.35  will  pa}^ 
for  only  as  much  labor  of  railway  employees  and  as  much  railway 
equipment,  fuel  and  other  materials  as  $1.00  would  buy  in  ^1897, 
and  that  nominal  railway  rates  had  been  so  adjusted  that  it  re- 
quired $1.10  to  pay  for  railway  services  that  $1.00  paid  for  in 
1897,  would  the  comparison  between  real  railway  rates  at  the  dif- 
ferent times  show  an  advance  or  a  reduction?" 

103 


"On  the  average  about  seventy  per  cent  of  railroad  re- 
ceipts go  for  expenses  and  thirty  per  cent  for  interest  and 
dividends  and  reserve  funds. 

"On  the  whole  this  would  show  a  reduction,  and  in  my 
opinion  just  about  the  reduction  called  for  to  produce  the 
best  results  for  the  owners  of  the  railroads." — N.  T. 
Bacon. 

"Allowance  must  be  made,  obviously,  for  improved 
economy  of  organization  and  operation  if  any,  and  also 
for  increased  purchase  of  railway  service  (both  passen- 
ger and  freight,  increasing  earnings  more  than  expenses) 
if  such  has  occurred.  Elimination  of  wastes  involved  in 
competition  or  otherwise  might  offset  a  larger  or  smaller 
proportion  of  increase  of  cost  though  rise  of  wages  and 
prices  or  even  more  than  offset  it." — Emily  Green 
Balch. 

"The  assumptions  here  are  hardly  sufficient.  When  you 
take  into  account  that  the  interest  rates  have  gone  down, 
that  the  efficiency  of  labor  in  some  cases  has  increased, 
that  the  efficiency  and  output  of  recent  apparatus  is  great- 
ly improved,  that  great  economies  have  been  effected  by 
the  perfection  of  organization  and  the  increase  in  the  vol- 
ume of  business  over  the  same  tracks,  it  would  seem  that, 
under  the  conditions  named,  the  real  railway  rates  as  com- 
pared with  labor  and  commodities  were  about  the  same. 
It  is  hard  to  estimate  the  items  of  increased  economy  and 
the  effect  of  a  lower  rate  of  interest,  especially  as  the  in- 
terest on  the  bonded  indebtedness  has  nominally  remained 
the  same." — John  Balch  Blood. 

"A  substantial  reduction,  in  my  j'udgment." — James 
E.  Boyle. 

"On  the  basis  of  these  assumptions,  I  believe  that  real 
railway  rates  have  been  reduced.    At  least  I  am  willing  to 

104 


admit  that  this  is  true.  In  your  questions,  however,  you 
do  not  make  clear  to  what  extent  the  increased  volume  of 
traffic  has  modified  earnings." — John  E.  Brindley. 

"In  comparison  with  the  cost  of  labor  and  materials 
real  railway  rates  would  show  a  reduction.  It  should  not 
be  overlooked,  however,  that  the  advance  in  prices  has  not 
increased  the  amount  of  money  needed  to  pay  interest 
charges,  rentals,  and  other  charges  depending  upon  past 
contracts.'' — Charles  J.  Bullock. 

"From  the  point  of  view  of  the  railway,  omitting  the 
possible  variation  in  fixed  charges  for  capital,  there  would 
be  a  reduction  of  real  rates.  From  the  point  of  view  of 
the  shipper,  this  reduction  would  be  conditional  upon  a 
corresponding  advance  in  the  nominal  price  of  the  com- 
modities shipped.'' — Victor  S.  Clark. 

"A  reduction."— F.  R.  Clow. 

"I  think  to  answer  that  question  intelligently  and  to 
carry  weight  would  require  that  one  be  a  railroad  ex- 
pert and  an  expert  accountant.  On  the  face  of  it,  it 
would  look  as  if  the  rates  were  reduced." — ^J.  W.  Crook. 

"The  comparison  would  show  an  advance  but  not  a  cor- 
responding.  advance  to  that  in  cost  of  labor  and  materi- 
als."— John  Franklin  Crowell. 

"A  reduction  of  from  twenty  to  twenty-five  per  cent." 
— F.  S.  Crum. 

"From  point  of  view  of  the  railroad,  to  the  extent  that 
the  wages  of  labor  of  railway  employees  enters  into  cost 
of  service  rendered,  real  rates  have  fallen.  This  might  be 
neutralized  by  reductions  in  other  items  of  railroad  ex- 

105 


penditures.  So  far  as  the  community  is  concerned,  rail- 
road rates  have  fallen  only  in  so  far  as  general  prices 
and  incomes,  including  wages,  generally  have  risen  more 
than  ten  per  cent." — John  Cummings. 

"If  these  were  the  only  factors  involved,  President 
Hadley's  statement  quoted  in  your  enclosure  would  cover 
the  case.  But,  if  what  I  can  learn  from  certain  shippers 
be  true,  they  now  very  commonly  pay  the  published  rate, 
and  in  1897  and  until  recently  they  often  obtained  a  rate 
below  the  published  rate.  So  that  the  actual  rate  paid, 
and  not  the  printed  tariff  must  be  considered.  If  the 
actual  rate  per  ton  mile  received  be  taken  as  the  basis  of 
comparison,  it  is  incumbent  on  the  roads  to  disclose  to 
what  extent  the  roads  paid  a  low  rate  on  commodities 
such  as  coal  in  which  railroads  had  an  indirect  interest. 
Moreover,  if  a  decline  in  the  rate  per  ton-mile  permitted 
such  an  expansion  of  traffic  that  net  receipts  showed  a 
gain,  I  do  not  see  that  the  carriers  should  complain  that 
the  price  paid  per  ton-mile  had  declined  while  articles  of 
commerce  commanded  a  higher  price  per  unit.  In  short, 
the  rightful  grievance  of  the  carrier,  if  he  has  one,  should 
be  directed  not  to  showing  a  fall  in  the  price  paid  for 
transportation  per  ton-mile  (whether  or  no  other  produc- 
ers are  or  are  not  getting  more  per  unit  of  output)  but  to 
showing  that  net  profits  accruing  to  carriers  are  affected 
unfavorably  relative  to  the  net  profits  of  producers  £:^en- 
erally." — W.  M.  Daniels. 

"But  the  fact  that  while  other  marketed  facts  have  av- 
eraged a  twenty-five  per  cent  advance  in  market  price, 
railroad  properties  have  scored  several  fold  this  increase 
as  expressed  in  stock  quotations  and  as  based  on  in- 
creased dividend-paying  power,  proves  that  at  the  new 
volumes  of  traffic,  the  rates  and  the  net  earnings  of  the 
later  years  were  over  high.    .It  may,  of  course,  be  justi- 

106 


fiable,  with  advancing  wages  and  raw  materials,  to  i-i.  ^ 
the  transportation  rates ;  whether  this  is  true  or  not  must 
depend  upon  whether  the  economies  attendant  upon  in- 
creased traffic  are  sufficient,  per  unit  of  goods  transport- 
ed, to  offset  the  higher  levels  of  expenditure.  The  tren  1 
of  dividends  from  1897  to  1907  is  fairly  definite  in  reply 
upon  this  issue.  It  is  ultimately  the  purchasing  power  of 
dividends  that  should  be  stable. 

"What  may  justifiably  be  done  in  1908,  when  the  prices 
of  the  cost  items  have  somewdiat  fallen  and  at  the  same 
time  the  volume  of  traffic  has  contracted  is  a  more  intri- 
cate problem.  Doubtless  if  the  decrease  of  traffic  could 
fairly  be  regarded  as  permanent  the  foregoing  analysis 
might  justify  an  increase  in  rates.  As  an  expedient,  how- 
ever, for  offsetting  a  temporary  diminution,  such  a  raise 
would  be  parallel  to  the  action  of  a  wage-earner  who 
should  demand  double  his  earlier  wages  on  the  ground 
that  he  was  able  to  work  only  half  time;  socially  speak- 
ing this  principle  would  lead  to  an  impasse. 

"If  the  railroads  are  really  menaced  with  receiverships 
through  a  temporary  restriction  of  traffic,  this  must  mean 
merely  that  they  have  been  allowing  their  capitalization  to 
run  overfar  in  the  direction  of  fixed-charge  forms  in- 
stead of  toward  stockholdings." — H.  T.  Davenport. 

"Viewed  in  one  way,  this  question  is  too  simple  to  re- 
quire an  answer,  but  I  object  to  the  application  of  the 
rule  of  three  to  such  a  complicated  question  as  this.  If 
this  sort  of  figuring  is  permissible,  let  us  do  away  with 
high  salaried  traffic  m.anagers  and  turn  the  office  boy 
loose  with  a  slide  rule,  and  old  schedule  of  rates,  and  the 
latest  table  of  index  numbers  whenever  a  readjustment 
of  railway  tariffs  seems  to  be  desirable.  If  you  want  to 
prove  that  railroad  rates  should  be  increased  in  1908  or  in 
any  other  year,  show  that  they  were  too  low  in  1907  to 
be  properly  remunerative  on  the  basis  of  the  real  invest- 

107 


ment  in  railroads  and  don't  attempt  the  impossible  task 
of  proving  or  assuming  that  they  were  all  right  ten  or 
twenty  years  ago,  with  the  exception  that  all  the  rest  of 
your  argument  can  be  taken  for  granted." — Carroll  W. 

DOTEN. 

"Such  a  comparison  would  presumably  not  at  least 
show  an  advance.  But  the  income  of  railways  is  not  de- 
termined merely  by  the  rate  charged  but  by  the  volume 
of  traffic.  In  a  general  way  there  is  an  impression  that 
the  railways  are  doing  pretty  well — in  view  of  the  present 
condition  of  industry — and  I  fear  that  an  advance  in 
rates  would  be  resented.  If  there  were  an  absolutely  im- 
partial tribunal  which  would  determine  rates  on  scientific 
hnes  (as  indicated  in  the  present  inquiry)  the  case  might 
be  different.  But  trained  and  scientific  judgment  in  these 
matters  is  hardly  known  in  this  country,  and  when  urged 
is  often  denounced.  In  some  measure  the  railways  have 
themselves  to  blame  for  this  state  of  things." — Garrett 
Droppers. 

"I  think  a  reduction.  The  foregoing  line  of  thought 
seems  to  me  stronger  against  a  reduction  in  nominal  rail- 
way rates  than  it  is  in  favor  of  an  advance.  At  least  it 
shows  that  the  railways  have  shared  with  the  public  the 
economies  of  the  last  ten  years.  Whether  the  railways 
have  shared  too  generously  with  the  public  so  that  they 
are  fairly  entitled  to  advance  rates  at  the  present  time  is 
a  point  upon  which  I  would  not  presume  to  pass  without 
detailed  study.  The  extent  to  which  the  carriers  have 
shared  their  economies  with  the  public,  the  effect  of  an 
advance  in  rates  upon  the  volume  of  traffic,  the  disturb- 
ing effect  upon  industries  in  general,  the  effect  upon  re- 
turning prosperity,  these  with  other  things  should  be 
taken  into  the  account  along  with  the  depreciation  of 
gold." — C.  F.  Emerick. 

io8 


"Under  the  conditions  assumed  above,  real  railway 
rates  would  certainly  show  a  reduction  since  1897.  With 
regard  to  your  whole  problem,  allow  me  to  say  that  I  feel 
there  can  be  no  question  as  to  the  fact  of  the  deprecia- 
tion of  the  American  dollar  since  1897  and  of  the  fact 
that  railway  rates  have  not  risen  to  correspond.  Assum- 
ing that  railway  rates  were  equitable  in  1897,  it  would 
follow  that  an  increase  in  rates  would  be  equitable  to-day. 
This  conclusion,  however,  depends  entirely  on  the  judg- 
ment as  to  the  fairness  of  rates  in  1897,  and  I  do  not  wish 
anything  that  I  have  written  to  be  construed  into  an  ex- 
pression of  opinion  that  the  railways  would  to-day  be  jus- 
tified in  raising  their  rates." — Fred  R.  Fairchild. 

"There  has  been  real  reduction,  if  rates  (nominally) 
have  advanced  less  than  the  (nominal)  advance  in  general 
prices  and  wages  (and  other  incomes)  of  those  who  pay 
railway  rates,  even  if  railway  equipment,  fuel,  etc.,  had 
not  risen  in  this  ratio.  That  is  the  rise  or  fall  of  railway 
rates  is  primarily  a  rise  or  fall  to  the  public  not  to  the  rail- 
way. Whether  or  not  this  rise  or  fall  corresponds  to  rise 
or  fall  of  railw^ay  operating  expenses  is  another  question 
concerning  which  I  have  no  special  knowledge." — Irving 
Fisher. 

"It  all  depends  upon  how  much  railway  service  a  given 
amount  of  railway  line  and  equipment  now  performs.  By 
amount,  I  mean  value  invested,  with  some  allowance  for 
the  slight  element  of  risk  in  rational  railway  construction. 
If,  for  example,  the  density  of  freight  traffic  has  doubled, 
then  the  nominal  railway  income  has  increased  from  one 
dollar  to  two  dollars  and  twenty  cents,  that  is,  by  one 
hundred  and  twenty  per  cent;  and  although  the  cost  of 
vdiat  railways  purchase  has  increased  thirty-five  per  cent, 
the  real  railway  income  has  increased  much.  And  this  is 
the  sort  of  comparison  w^e  make,  or  should  make,  when 

109 


we  distinguish  nominal  from  real  wages  and  nominal 
from  real  prices.  In  my  judgment,  your  questions  taken 
together,  make  an  improper  use  of  the  term  rates  in  sug- 
gesting a  close  analogy  to  wages." — Willard  C.  Fisher. 

"Reduction/' — J.  D.  Forrest. 

''A  reduction." — A.  G.  Fradenburgh. 

"A  reduction." — George  P.  Garrison. 

''It  would  indicate  a  reduction." — David  I.  Green. 

''Other  things  remaining  equal  the  comparison  would 
show  relative  reduction." — Lewis  H.  Haney. 

"I  cannot  answer  this  question,  giving  the  situation  as 
a  whole.  To  the  best  of  my  information,  railroad  rates 
require  just  as  much  adjustment  and  review  at  this  time 
as  does  the  tariff,  and  I  believe  on  careful  investigation  it 
will  be  found  that  many  railroad  rates  should  be  in- 
creased, and  that  many  more  should  be  reduced.  In 
other  words,  a  general  adjustment  as  to  time,  distance 
and  commodities  is  necessary  and  advisable  to  do  equal 
justice  to  the  railroads  and  to  the  people." — W.  O.  Hart. 

"It  v/ould  undoubtedly  show  a  reduction  in  value  re- 
ceived for  service  rendered  by  transportation  companies. 
But  reasonable  economy — operation,  higher  prices  for 
subsidy  lands  received  free  and  held  without  cost,  and  the 
concession  of  over-capitalization  of  properties  tend  to 
mitigate  the  apparent  injustice  of  depressed  railway 
charges  and  earnings — in  the  face  of  advancing  costs  of 
operation  and  maintenance." — R.  H.  Hess. 

"Reduction." — Joseph  French  Johnson. 

no 


"Such  a  comparison  would  show  a  substantial  reduction 
if  the  character  of  the  materials  used,  and  the  character 
of  the  services  rendered  to  the  railroads  and  by  the  rail- 
roads at  the  two  periods  were  essentially  the  same. 

*'In  the  interpretation  of  this  answer  it  should  be  noted 
that  (i)  a  long  haul  is  cheaper  per  ton-mile  than  a  short 
haul  and  that  the  length  of  the  haul  has  shown  a  ten- 
dency in  recent  years  to  increase,  (2)  that  low  grade 
traffic  can  be  handled  more  cheaply  than  high  grade  traf- 
fic, and  that  there  has  been  a  tendency  in  recent  years  to- 
ward an  increasing  proportion  of  bulky  traffic  and  (3) 
quoting  the  Report  of  the  United  States  Industrial  Com- 
mission (XIX,  p.  2'-jj')  :  *^  *  He  *  Increase  in  the  vol- 
ume of  business  enables  the  railroad  to  perform  the  ser- 
vice at  a  constantly  decreasing  cost.  Reliable  computa- 
tions show  that  from  two-thirds  to  three-fourths  of  the 
expenses  of  railroad  operation  are  entirely  independent  of 
the  amount  of  traffic  moved.  This  being  the  case,  such 
expenses  having  once  been  covered  it  costs  the  railroad 
for  additional  business  little  more  than  the  mere  cost  of 
conducting  transportation,  as  it  is  called.  As  -a  result, 
any  increase  of  business  above  a  certain  figure,  yields  far 
more  than  a  proportionate  rate  of  profit." — E.  W.  Kem- 

MERER. 

*'The  statistical  answer  to  this  question  is  that  real  rail- 
way rates  show  a  relative  reduction.  By  statistical  an- 
swer I  mean  the  answer  which  one  has  to  give  if  he  con- 
siders society  as  a  whole  paying  for  railway  services. 
The  conditions  described  might  exist,  however,  and  repre- 
sent an  advance  for  individual  shippers.  This  would  be 
the  case  where  the  price  of  the  product  of  the  individual 
shipper  had  not  advanced  proportionately  with  the  price 
of  other  things,  including  railway  service.  There  might, 
on  the  other  hand,  be  shippers  whose  products  had  so  ad- 
vanced in  price  that,  relatively  to  the  value  of  the  railway 

TTT 


service  to  them,  $i.io  might  be  a  less  proportion  of  their 
cost  of  production  than  $i.oo  thirteen  years  ago.  In  other 
words,  the  answer  that  there  is  a  relative  reduction  is  an 
average  answer,  and  an  average  answer  might  not  fit  any 
individual. 

"Moreover  some  railway  service  may  be  rendered  at 
smaller  cost  of  production  to  the  railway  than  it  was 
thirteen  years  ago,  even  though  the  prices  of  equipment 
and  labor  had  gone  up.  Improved  processes  might  off- 
set the  increased  cost  due  to  these  higher  prices.  This  is 
a  question  of  fact  to  be  determined  before  a  conclusive 
answer  can  be  given  to  your  question." — David  Kinley. 

''I  can  only  answer  this  question  as  I  answered  ques- 
tion No.  6.  Allow  me  to  state,  however,  that  the  cost  of 
transporting  freight  on  railways  in  this  country  depends 
not  only  on  the  wages  paid  for  labor  and  the  expense  of 
equipment  and  fuel,  but  it  depends  also  upon  the  amount 
of  freight  to  be  transported,  and  the  condition  of  the  rail- 
ways, and  their  rolling  stock." — M.  A.  Kursheedt. 

'*A  reduction.  This  seems  to  be  a  'catch'  question  for 
the  purpose  of  ascertaining  whether  we,  who  fill  out  these 
blanks  really  grasp  the  difference." — Charles  H.  Leeds. 

"Reduction."— W.  H.  Lough,  Jr. 

*'The  comparison  would  show  a  'real'  reduction  in 
rates.  This  reduction  was  probably  justified  by  increase 
in  volume  of  traffic  (up  to  1907)  and  by  recurring  econo- 
mies of  administration  and  management." — Roswell  C. 
McCrea. 

"Assuming  the  facts  as  stated,  evidently  the  real  rail- 
way rates  have  declined  unless  the  current  rates  of  inter- 

112 


est  on  securities  similar  in  character  to  railway  bonds 
have  declined,  which  was  not  the  case  between  1897  and 
1907. 

''But  this  comparison  does  not  indicate  what  is  a  'fair 
rate'  because  the  standard  of  comparison,  the  average  rate 
in  1897,  is  not  known  to  have  been  fair,  and  a  'general 
rate'  is  delusive  because  the  circumstances  of  railways 
vary." — John  Martin. 

"Comparing  1897  with  1907  the  figures  would  certainly 
show  a  reduction  in  real  railway  rates.  Whether  the  rela- 
tive reduction  is  greater  than  the  public  has  a  right  to  de- 
mand from  railways  is  another  question.  Density  of  traf- 
fic and  the  kind  of  traffic  are  all  important.  Back  loading 
and  low  rates  on  heavy  cheap  freights  bring  down  the 
>rate  per  ton-mile,  simply  by  employing  the  plant  more 
nearly  up  to  its  capacity.  As  long  as  the  railroads  find 
that  it  pays  to  carry  this  traffic  at  the  cheaper  rates,  there 
is  no  occasion  to  push  the  rates  up.  It  must  not  be  for- 
gotten that  the  transportation  business  is  a  quasi-public 
business.  Changes  in  rates  must  be  made  with  caution. 
For  that  reason,  I  favor  a  physical  valuation  of  the  roads, 
not  as  a  means  of  attacking  the  railroads,  but  as  a  means 
of  protecting  them  if  necessary  against  legislative  raids, 
by  determining  the  vexed  questions,  propounded  by  the 
Supreme  Court,  but  never  ansv^ered  by  that  august  body, 
as  to  what  is  a  reasonable  rate,  a  fair  income,  and  a  just 
basis  for  estimating  both  rates  and  income." — Royal 
Meeker. 

"A  reduction.  In  an  unpublished  article  on  railroad 
rate  regulation  written  two  or  three  years  ago,  it  so  hap- 
pened that  I  anticipated  the  answer  to  this  question  as  fol- 
lows :  *At  a  time  when  the  general  purchasing  power  of 
money  is  declining  (as  it  is  with  us  now)  an  advance  of 
the  average  money  price  charged  for  transportation  not 

113 


out  of  line  with  the  general  advance  of  prices,  is  no  real 
advance  of  rates  at  all.  A  slight  advance  of  prices  of 
transportation  which  is  less  than  the  average  advance  of 
prices  of  other  things  bought  and  sold  (which  has  re- 
cently taken  place  on  our  railroads)  constitutes  actually 
a  decline  in  rates.  The  railroads  are  performing  the  same 
social  service,  in  these  circumstances,  for  a  smaller  real 
recompense.'  " — Charles  W.  Mixter. 

^'According  to  the  data  at  hand  and  the  hypothesis  pre- 
sented, real  railway  rates  have  steadily  decreased.  Of 
this  I  think  there  can  be  no  question." — ^James  B.  Mor- 

MAN. 

"On  the  supposition  that  there  were  no  improvements 
in  the  technique  of  the  railway  business,  and  that  real 
railway  rates  are  as  I  have  defined  them,  the  data  fur- 
nished in  your  example,  if  I  understand  it  correctly, 
would  indicate  a  real  reduction  of  twenty-five  per  cent 
along  side  of  the  nominal  increase  of  ten  per  cent.  As  the 
improvement  in  technique  is  a  factor  to  be  reckoned  with, 
I  think  that  all  things  considered  there  would  still  be  a  re- 
duction."— George  S.  Moynahan. 

"A  reduction  looked  at  from  the  point  of  view  of  the 
railway,  the  railway  employee  or  the  producer  of  railway 
equipment,  fuel  or  materials.  To  discover  the  real  ex- 
tent of  the  reduction  from  the  point  of  view  of  the  rail- 
way, it  would  be  necessary  to  ascertain  the  rates  of  re- 
turn to  capital  in  the  respective  years,  and  the  relative 
importance  of  payments  for  the  use  of  capital  as  compared 
with  those  for  labor  and  supplies. 

"The  data  given  in  this  question  do  not  show  whether 
rates  have  fallen  when  measured,  by  the  labor  or  com- 
modity cost  of  the  services  obtained  to  those  who  obtain 
them,  but  other  figures  in  your  circular  letter  and  other 

114 


statistics  of  wages  and  prices  prove  that  they  have — that 
is  to  nearly  all  purchasers  of  transportation." — H.  T. 
Newcomb. 


''It  is  right  here,  so  it  seems  to  me,  that  your  whole  ar- 
gument breaks  down.  It  does  not  follow  because  wages 
and  materials  of  equipment  cost  more  than  in  1897,  that 
the  cost  of  a  unit  of  transportation  is  greater. 

"i.  Does  not  a  train  of  say  twenty  cars  and  one  engine, 
with  regular  appointment  of  men  and  fuel,  do  much  more 
business  and  bring  in  much  larger  total  cash  returns,  when 
zvell  patronised  as  it  has  been  since  1897,  than  it  did  when 
practically  empty,  as  it  was  before  1897? 

"2.  Does  not  an  improved  engine  hauling  a  much  longer 
train  bring  in  cash  returns  larger  in  proportion  than  did 
the  smaller  engine  and  its  shorter  train? 

"3.  Does  not  the  roadbed,  carrying  twice  as  many 
trains  a  day  pay  its  own  share  of  the  expenses  of  trans- 
portation and  leave  a  larger  surplus  to  reduce  the  real 
expense  (per  unit  of  weight  and  distance)  of  transporta- 
tion? 

"4.  For  these  and  other  reasons  may  not  the  real  pro- 
fits of  the  railroad  be  greater  at  the  same  rates  even 
though  the  general  prices  be  higher?'' — L.  W.  Parish. 

This  is  a  mere  question  of  mathematics,  provided  inter- 
est rates  remain  at  the  same  level  as  in  1897.  The  an- 
swer is  clearly:  you  have  a  reduction." — Julius  H.  Par- 
melee. 

''According  to  the  hypothesis,  the  real  railway  rates 
would  certainly  show  a  reduction." — Warren  M.  Per- 
sons. 

115 


*'If  your  answer  states  conditions 
"Variable  expenses  66x1.35  $0.89 
'Tixed  ''         34  X  i.oo       .34 


$1.23 
'Rates  1. 10 


* 'Failure  of  rates  to  keep  pace  by  thirteen  cents. 
''But  grant  an  advance  in  traffic  and  the  result  may 
well  be  the  other  way.'' — Carl  C.  Plehn. 

"I  think  a  decline  decidedly.  This  does  not  .mean  that 
an  increase  in  nominal  rates  would  be  necessary,  for  in- 
creased business  might  overcome  the  difference.  I  am  in 
sympathy  with  Mr.  Brown,  of  the  New  York  Central,  and 
believe  that  his  position  is  fair  and  reasonable  and  in  the 
long  run  the  best  for  shipper,  consumer  and  the  Nation 
as  a  whole." — ^Jesse  E.  Pope. 

"Reduction  of  nearly  twenty-five  per  cent  interest." — 
H.  H.  Powers. 

"The  comparison  would  indicate  a  reduction.  This 
reduction  may  be  equitable  or  inequitable,  according  to 
changes  of  costs  of  transportation  due,  and  other  fact- 
ors."— L.  G.  Powers. 

"The  answer  depends  on  other  factors  not  given." — 
Lawson  Purdy. 

"Improvements  in  machinery  cau^e  a  less  proportion 
of  labor  to  service  now  than  formerly  and  the  deprecia- 
tion in  value  of  road  and  especially  of  equipment  call  for 
less  capital.  Hence  the  question  is  not  a  fair  one." — H, 
W.  Quaintance. 

116 


'This  would  mean  a  decrease  in  the  real  railway 
charges  since  1897." — Charles  Lee  Raper. 

''A  reduction.  All  the  above  argues  for  an  increase  in 
rates,  for  pooling  of  earnings,  for  combination  of  railways 
into  larger  systems ;  but  it  does  not  argue  against  a 
tamed-down  governmental  supervision.  I  believe  the  peo- 
ple are  justified  in  requiring  the  railroads  to  keep  up  more 
detailed  accounting  systems,  to  give  fuller  reports,  all  of 
the  same  uniform  arrangement,  and  to  be  more  honest 
with  each  other.  As  a  stockholder  in  several  systems,  I 
welcome  such  things.  I  know  better  where  I  'am  at' ;  but 
perhaps  it  is  not  too  much  to  say  that  the  public  ought  to 
pay  for  more  information  with  more  cash.  The  general 
feeling  among  the  common  people  is  that  rates  are  none 
too  high,  but  have  been  partial  or  discriminating.  There 
is  growing  up  a  pretty  general  feeling  that  the  railroads 
are  sinned  against  and  sinning,  and  that  both  must  di- 
minish, even  at  considerable  cost." — Walter  T.  Ray. 

"Real  railway  rates,  granting  this  postulate,  would 
doubtless  shov/  a  decrease." — Gardner  Richardson. 

"A  reduction,  saving,  however,  this  reservation :  that 
if  the  interest  charges  of  the  railways  had  become  rela- 
tively less  in  the  interval,  or  if  important  economies  were, 
meanwhile,  effected,  as,  for  instance,  by  improvements  in 
business  methods  or  mechanical  appliances,  or  through  a 
heightened  ratio  of  ton-mileage  to  trackage  operated — 
then  such  factors  should  be  taken  into  the  account  in  as- 
certaining the  extent  of  the  reduction,  or  in  determining 
whether  or  not  a  virtual  reduction  was  effected  by  the 
given  alterations  in  the  freight  rates  and  the  related 
prices." — Philip  A.  Robinson. 

"I  don't  like  this  way  of  putting  it.  In  stage  coach 
days,  perhaps,  half  the  prices  currently  paid  for  commodi- 

117 


ties  were  barely  sufficient  to  remunerate  the  shipper.  With 
every  improvement  since  transportation  charges  have  been 
lowered  and  properly  so.  'Real  railway  rates'  are  not  a 
fixed  percentage  of  the  prices  of  commodities  carried.  If 
you  ask  if  under  these  circumstances  the  railways  are 
fairly  open  to  criticism  for  advancing  their  rates,  I 
should  say,  *No,'  unless  they  were  making  very^  large 
profits  before,  they  have  shown  great  moderation  in  in- 
creasing their  charges  only  one-tenth  when  their  costs 
have  risen,  according  to  your  statement,  more  than  one- 
third." — Henry  R.  Seager. 

"Granting  what  is  assumed  in  this  question,  I  would 
say  that  the  value  which  the  railroad  receives  for  a  given 
service  is  less.  This,  it  seems  to  me,  would  warrant  no 
conclusion,  however,  as  to  the  reasonableness  or  unrea- 
sonableness of  railway  rates,  since  other  matters  w^ould 
have  to  be  considered." — J.  Allen  Smith. 

"This  is  a  question  in  arithmetic,  not  in  political  econ- 
omy."— N.  I.  Stone. 

i 
"A    reduction   but   not   necessarily   more   than   other 

changes   warrant;   such   as   increased   numbers   of   cars 

per   train   and    increased    services    in    relation   to   fixed 

charges." — George  S.  Sumner. 

"A  reduction." — Frank  J.  Symmes. 

"In  effect  it  would  show  a  reduction  whereas  the  cost 
of  providing  the  service  had  risen  thirty-five  per  cent, 
the  charge  for  the  service  would  have  been  increased  to 
the  public  only  ten  per  cent. 

"One  question  you  do  not  ask  and  one  kind  of  infor- 
mation of  importance  here  you  have  omitted.  With  in- 
crease of  population  and  business,  the  amount  of  traffic 

Tl8 


for  the  railroads  must  have  greatly  increased  since  1897. 
It  occurs  to  me  that  in  this  the  railroads  should  have 
found  considerable  compensation  for  increased  cost  of 
providing  the  service  rendered.  Still,  this  compensation 
might  not  more  than  offset  the  difference  above  allowed, 
in  that  a  terf  per  cent  raise  in  charge  for  service  is  set 
forth  against  a  thirty-five  per  cent  rise  in  cost  of  provid- 
ing the  same." — J.  A.  Tillinghast. 

"The  meaning  of  the  question  is  not  clear,  as  is  shown 
by  my  answer  to  the  first  question.  Therefore,  I  cannot 
answer  it." — Edson  Newton  Tuckey. 

"Reduction,  of  course.    Q.  E.  D."— E.  B.  Waller. 

1. 10 

"It  would  show  a  reduction  in  the  proportion  of  1.35= 
.815  by  18.5  per  cent. 

"I  think,  however,  that  in  reality  the  reduction  has  not 
been  so  great  as  this,  and  that  if  we  offset  the  probably 
too  high  rates  in  1897  and  the  improvements  and  econo- 
mies since  effected,  the  rates  are  not  yet  seriously  too  low. 
But  they  may  become  so  if  the  rise  of  general  prices  con- 
tinues, and  then  a  gradual  raising  of  rates  would  be  justi- 
fiable. The  difficulty  of  raising  railway  rates  is  a  reason 
why  railway  managers  should  set  themselves  in  opposition 
to  all  measures  that  tend  to  increase  the  depreciation  of 
the  money  standard,  such  as  enlarging  the  facilities  for 
the  banks  to  put  out  more  bank  notes.  A  period  of  rising 
prices  due  to  augmentation  of  the  supply  of  metallic 
money  (gold)  is  a  proper  period  for  diminishing  the  sup- 
ply of  credit  currency." — C.  M.  Walsh. 

"A  reduction.  The  principle  is  the  same  and  produces 
like  results  whether  applied  to  an  individual  or  a  body 
corporate." — A.  J.  Warner. 

119 


''This  may  be  solved  by  the  ancient  rule  of  three,  and 
most  high  school  boys  in  the  first  grade  can  do  it  as  well 
possibly  better  than  I,  hence  I  will  not  make  the  at- 
tempt."— D.   C.  WeSTEN  HAVER. 

"  'Real'  railway  rates  (using  under  protest  Mr.  Mer- 
ritt's  distinction)  have  probably  fallen  since  1897.  They 
certainly  have  on  your  assumption,  which  is  probably  sub- 
stantially correct.  But  two  further  questions  at  once  fol- 
low, though  you  do  not  include  them  here.  i.  Are  the 
rates  ton-mile  rates?  If  so,  much  finite  analysis  is  re- 
quired for  safe  reasoning.  If  Mr.  Merritt's  7.80  mill  rate 
came  from  a  total  that  included  a  relatively  great  amount 
of  low-grade  long  haul  freight,  it  may  have  been  a  high 
Veal'  rate,  using  the  word  Veal'  now  to  indicate  another 
very  important  and  valid  distinction.  The  cost  of  hauling 
this  would  clearly  have  been  relatively  low,  and  the  rate 
high  in  proportion  to  energy  expended.  2.  Has  the  gener- 
ally increased  business  of  railways  in  the  last  ten  years 
made  what  was  earlier  a  low  rate  into  a  high  one.  The 
railways  cannot  set  themselves  up  as  a  peculiar  institu- 
tion in  the  matter  of  fixing  specific  rates  (what  the  traffic 
will  bear,  a  principle  to  which  I  assent)  and  then  deny 
their  corresponding  peculiarity  when  it  is  a  question  of 
general  level  of  rates. 

*Tn  conclusion,  I  should  like  to  dissent  from  the  posi- 
tion of  the  New  York  Evening  Post  and  certain  other 
imperfectly  educated  economists  in  their  assumption  that 
increasing  rates  may  not  be  economically  wise,  from  the 
point  of  view  of  the  railways — if  the  dear  people  will  not 
protest  too  much.  It  seems  to  me  that  some  of  these  edi- 
torial friends  studied  their  economics,  before  the  theory 
of  monopoly  had  been  developed,  and  when  it  was  too 
hastily  assumed  that  the  general  principles  valid  for  in- 
tensely competitive  industries  were  universally  valid.  It 
seems  to  me  absolutely  unescapable  that  an  increased  rate 

120 


may  not  curtail  even  a  depression  volume  of  traffic  suf- 
ficiently to  prevent  an  increase  of  net  earnings. 

"As  I  said  at  the  beginning,  these  words  are  not  care- 
fully weighed,  but  written  currente  calanio;  but  the  ideas 
that  they  very  roughly  express  have  been  long  in  my 
mind  and  often  expressed.  Moreover,  there  are  many 
other  points  which  you  do  not  touch  upon  that  seem  to  me 
so  intimately  involved  with  these  that  your  failure  to  in- 
clude them  will  defeat  your  purpose,  assuming  as  I  do 
that  your  purpose  is  honest,  unbiased  inquiry." — George 
Ray  Wicker. 

"Striking  out  the  word  real  above,  since  it  is  of  doubt- 
ful significance,  the  cost  of  transportation  to  the  shipper 
has  declined  provided  the  values  of  commodities  in  gen- 
eral have  changed  in  the  ratio  of  i.oo  to  1.35." — M.  S. 

WiLDMAN. 

"Unquestionably  a  reduction.  What's  the  use  of  going 
to  school  and  being  a  goose." — A.  B.  Woodford. 

"A  reduction.  However,  we  must  take  into  considera- 
tion the  volume  of  freight  to-day  as  compared  with  1897 
before  we  conclude  that  rates  are  too  low  to-day  because 
they  are  really  lower  than  they  were  in  1897  when  we  ad- 
mit that  they  were  not  too  high." — Lester  W.  Zartman. 


121 


ANALYSIS  OF  ANSWERS. 
By  the  Editor  of  the  Railway  World. 

The  initial  impression  likely  to  be  left  by  a  perusal  of 
the  foregoing  pages  undoubtedly  gives  full  recognition  to 
the  wide  divergencies  of  opinion  which  they  disclose. 
Extensive  as  these  differences  at  first  appear,  it  is  believed 
that  a  closer  study  will  reveal  the  fact  that,  excluding  a  few 
answers  which  exhibit  a  bias  so  evident  as  plainly  to  de- 
prive them  of  all  value,  the  differences  are  superficial 
rather  than  actual.  Thus,  the  form  of  the  first  question 
unquestionably  suggested  distinctions  of  terminology 
which  seemed  of  such  considerable  importance  to  some 
of  those  whose  answers  are  published  as  to  warrant  more 
or  less  discussion  of  definitions.  Those  who  answered  the 
first  question  with  an  unqualified  affirmative  were  not,  it 
is  to  be  presumed,  unaware  of  these  distinctions  but,  it  is 
probable,  that  in  spite  of  these  distinctions,  the  question 
appeared  to  them  to  express  a  vital  principle  with  suffi- 
cient clearness  to  warrant  a  categorical  reply.  As  to  the 
principle  involved  there  is  plainly  no  difference  between 
the  unqualified  affirmative  of  President  Andrews,  Profes- 
sor Bullock,  Dr.  Crowell,  Professor  Irving  Fisher,  Profes- 
sor Meeker,  Professor  Plehn,  Dr.  LeGrand  Powers  and 
the  responses  of  Dr.  Adams,  Professor  Daniels,  Mr.  New- 
comb  and  Professor  Seager,  although  the  last  four  named 
are  typical  of  those  who  considered  some  discussion  of 
terminology  expedient.  These  differences  in  no  way  de- 
tract from  the  value  of  this  compilation. 

Excluding  from  consideration  such  merely  formal  or 
superficial  differences  as  those  just  discussed  the  conclu- 
sions seemingly  warranted  by  underlying  harmonies  to 

122 


be  found  in  the  opinions  are  clear  and  definite.  All  of 
those  whose  answers  to  the  first  question  are  deserving  of 
weight  are  plainly  of  the  opinion  that  the  value  of  money 
fluctuates  from  time  to  time  and  varies  as  between  differ- 
ent places  so  that  comparisons  of  wages,  prices  or  rail- 
way rates  are  likely  to  be  deceptive  unless  these  difiPeren- 
ces  in  purchasing  power  are  examined  and  made  a  part 
of  the  subject  matter  compared.  This  conclusion  is  so  ob- 
viously in  accord  with  common  sense  and  with  the  weight 
of  economic  authority  from  Adam  Smith  to  the  present 
day  as  to  need  no  further  argument. 

Equally  clear  is  it  that  the  conclusions  of  those  best 
qualified  to  throw  light  upon  the  second  question  are  that 
the  distinctions  betw^een  "nominal"  or  money  wages, 
prices  and  railway  rates,  on  the  one  hand,  and  "real"  or 
purchasing  power  wages,  prices  or  railway  rates,  upon 
the  other  hand,  are  of  such  high  intrinsic  importance  that 
neglect  to  take  them  fully  into  account  destroys  all  basis 
for  comparisons.  As  a  matter  of  fact  this  conclusion  was 
made  inevitably  necessary  by  the  answers  to  the  first  ques- 
tion. 

The  third  question  carried  the  inquiry  a  step  further 
by  asking  whether  the  American  dollar  has  depreciated 
since  1897.  Here,  too,  whatever  difference  appears  is 
one  of  definition  rather  than  of  reality.  All  seem  to  agree 
that  there  has  been  a  notable  rise  in  prices  and  wages  and 
nearly  all  realize  that  appreciation  of  commodities  and  de- 
preciation of  standard  money  are  synonymous  terms.  The 
very  few  who  regard  value  as  a  quality  persisting  as  in- 
variably in  the  standard  dollar  (that  is  to  say,  in  23.22 
grains  of  fine  gold)  as  the  quality  of  length  persists  and 
remains  constant  in  the  yard  stick  or  that  of  weight  in 
the  standard  pound  avoirdupois  have  not  failed  to  find 
representation  but  the  "it  is  an  insult  to  ordinary  intelli- 
gence to  suggest  that  the  dollar  could  depreciate"  of  Dr. 
Quaintance  is  only  typical  of  a  state  of  mind  which  re- 

123 


jects  commonly  accepted  definitions.  It  is  outweighed  by 
the  "Yes"  of  Professor  Dewey,  Professor  Irving  Fisher, 
Professor  Johnson,  Professor  Meeker,  Dr.  Mixter,  Mr. 
Purdy,  Professor  Plehn,  Professor  Seager  and  Dr.  Em- 
erick;  by  the  "Undoubtedly"  of  Professor  Bullock,  Dr. 
Cummings,  Professor  Daniels,  Professor  Garrison  and 
the  "Most  certainly"  of  President  Andrews.  One  could 
not  wish  higher  sanction  for  an  economic  proposition  than 
its  complete  acceptance  by  these  distinguished  students 
and  the  others  who  agree  with  them.  But  even  Dr. 
Quaintance  did  not  mean  to  assert  that  the  purchasing 
power  of  the  dollar  has  not  declined.  To  do  so  would  be 
to  contradict  the  common  experience  of  a  decade,  the  ob- 
servation of  every  American  citizen,  and  official  and  pri- 
vate statistics  of  conceded  accuracy.  What  he  really 
meant  was  to  deny  that  the  value  of  the  dollar  is  its  ratio 
in  exchange  with  other  commodities  and  to  assert  that  it 
is  a  permanent  quality  attaching  to  the  quantity  of  metal 
made  the  unit  of  prices,  just  as  length  or  breadth  or 
weight  or  hardness  attach  to  the  same  quantity  of  the 
same  metal.  This  would  do  very  well  if  the  terms  "price," 
"value,"  "depreciation,"  et  cetera,  had  acquired  no  real 
and  definite  meaning  but  to  seek  to  give  them  new  mean- 
ings now^  is  a  fruitless  task  which,  if  sucessful,  would 
only  lead  to  confusion  similar  to  that  which  would  fol- 
low general  interchanges  of  the  names  and  significance 
of  the  Arabic  numerals. 

It  was  to  have  been  expected  that  the  fourth  question, 
the  first  to  ask  for  a  quantitative  answer,  should  lead  to 
greater  disagreement.  All  agree  that  the  doll^ir  now  has 
diminished  purchasing  power  but  the  extent  of  the  dimi- 
nution or  depreciation,  naturally  appears  diflFerently  to 
observers  of  varying  outlook.  The  eflfort  to  reconcile  the 
divergent  estimates  would  be  useless  but  it  is  fairly  ac- 
curate to  say  that  the  best  opinion  seems  to  unite  upon  a 
depreciation  of  from  twenty-five  to  thirty  per  cent.   This 

124 


is  probably  sufficiently  accurate  for  all  general  purposes. 

Agreement  is  also  evident  upon  the  substantial  conclu- 
sion that  those  wages,  prices  or  rates  which  have  not  been 
adjusted  to  the  diminished  value  of  the  dollar  are  really 
lower  by  reason  of  such  lack  of  adjustment.  ''Deprecia- 
tion of  real  income"  is  an  expressive  term  applied  to  this 
condition  by  Dr.  Willard  C.  Fisher  while  Dr.  H.  H.  Pow- 
ers responds  to  the  effect  that  fixed  prices,  wages  and 
legal  rates  which  cannot  be  modified  except  with  difficulty 
have  generally  been  lowered.  The  answers  to  this,  the 
fifth  question,  are  not  easily  summarized  but  they  all  sup- 
port the  conclusion  that  injustice  and  hardship  attach  to 
absence  of  compensatory  adjustment  to  meet  the  changed 
value  of  standard  money. 

Those  who  answer  the  sixth  question  agree,  with  few 
exceptions,  upon  the  statement  that  the  general  level  of 
railway  charges  was  not  too  high  in  1897.  Some  have 
regarded  it  as  necessary  to  modify  this  conclusion  by  al- 
luding to  complaints  alleging  injustice  in  the  relative 
charges  for  different  services  but  this,  of  course,  intro- 
duces a  question  of  another  sort  which  has  no  possible  re- 
lation to  the  present  inquiry.  The  sole  value  of  this  ques- 
tion, as  a  step  in  the  inquiry  now  in  hand,  is  to  establish 
whether  or  not  the  railway  charges  of  1897  constitute  a 
fair  basis  of  comparison.  That  they  are  generally  ac- 
cepted as  a  fair  basis  for  that  purpose  is  plainly  demon- 
strated by  these  answers. 

The  seventh  question  was  regarded  by  some  as  merely 
a  simple  example  of  the  "rule  of  three"  and  by  others  as 
requiring  considerable  analysis  and  not  admitting  of  a 
concise  and  unequivocal  answer.  The  most  interesting 
suggestions  are  based  upon  a  rather  wide  departure  from 
the  inquiry  and  introduce  a  qualification  which,  though 
really  unsound,  may  appeal  to  many  readers.  This  is, 
perhaps,  as  well  illustrated  by  the  answer  of  Dr.  Willard 
C.  Fisher,  as  any  other.    This  answer  seems  to  imply  that 

125 


if  the  economic  pressure  due  to  a  decline  in  rates  brought 
about  by  a  depreciation  of  the  medium  of  exchange  has 
compelled  economies  sufficient  to  permit  the  profitable  con- 
tinuance of  the  industry  the  railways  have  no  right  to  ask 
for  higher  returns.  This  is  equivalent  to  asserting  the  right 
of  the  traveling  and  shipping  public  to  confiscate  all  the 
economies  of  the  most  efficient  management.  How  long 
this  principle  could  be  carried  out  in  practice  without  re- 
ducing all  railway  management  to  a  dead  level  of  ineffi- 
ciency and  eliminating  all  chance  or  hope  of  further  pro- 
gress in  methods  or  management  constitutes  an  interest- 
ing speculative  problem.  That  it  would  produce  such  a 
result  sooner  or  later  is,  however,  quite  beyond  question. 
No  such  condition  as  that  suggested  is  now  under  con- 
sideration. The  subtle  operation  of  monetary  deprecia- 
tion has  reduced  railway  rates  to  the  unprofitable  point. 
"The  forces  bringing  about  the  rise  of  prices  will  neces- 
sarily lead  to  a  rise  of  railroad  rates — or  to  railroad  bank- 
ruptcy," said  Professor  Joseph  French  Johnson,  one  of 
the  ablest  of  American  economists,  in  response  to  the  sec- 
ond question.  'Tt  will  first  check  improvements  and  ulti- 
mately bankrupt  the  roads,"  writes  Dr.  Mixter,  treating 
of  a  continuance  of  present  conditions  and  tendencies,  and 
"failure  to  take  into  account  this  distinction  may  bank- 
rupt a  road,  stop  dividends  and  thus  cause  financial  dis- 
turbance; or,  in  case  dividends  are  continued,  needed  im- 
provements or  extensions  may  be  stopped,"  declares  Pro- 
fessor Pope.  These  are  the  real,  actual,  controlling  con- 
ditions. They  are  the  conditions  which  must  determine 
the  policy  of  this  newspaper  in  this  crisis. and  ought  to  de- 
termine the  attitude  of  every  intelligent  American,  what- 
ever his  personal  interest  or  wherever  th^t  interest  might 
otherwise  lead. 

The  American  dollar  has  lost  from  twenty-five  to  thirty 
per  cent  of  its  purchasing  power  since  1897 ;  it  is  worth 
that  much  less  in  the  treasury  of  any  railway  to-day  than 

126 


it  was  ten  years  ago.  Railway  rates,  expressed  in  dollars 
and  cents  are  about  where  they  were  in  1897  or  slighth 
lower;  therefore,  such  rates  have  gone  down  with  the  pur- 
chasing power  of  the  money  in  which  they  are  paid.  The 
employees  of  railways  are  not  generally  overpaid,  the 
prices  of  railway  materials  and  supplies  cannot  be  sub- 
stantially reduced;  railway  improvements  and  extensions 
costing  immense  aggregates  are  demanded  by  the  public 
and  ought  to  be  supplied.  These  facts,  amply  supported 
by  the  results  of  the  inquiry  here  submitted,  lead  unmis- 
takably to  the  conclusion  that  the  schedules  of  railway 
freight  rates  must  be  revised;  that  there  must  be  some 
compensatory  adjustment  to  make  up,  in  part  at  least,  for 
the  extensive  fall  in  the  value  of  the  American  dollar. 

EDWARD  G.  WARD. 

Railway  World, 
WiTHERSPOON  Building, 
Philadelphia. 

February  20,  1909. 


OF  THE 

UNIVERSITY 

OF 


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